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SM Energy (SM): Assessing Valuation After a Steep Pullback Despite Rising Revenue and Profit

Simply Wall St · 3d ago

SM Energy (SM) has quietly drifted lower over the past 3 months, even as its revenue and profits continue to grow. That disconnect is exactly what makes the stock interesting right now.

See our latest analysis for SM Energy.

Over the past year, SM Energy’s share price has swung from strength to weakness, with a 90 day share price return of negative 24.63 percent and a one year total shareholder return of negative 50.87 percent. This suggests sentiment has cooled even as fundamentals improved, hinting that the market is pricing in more risk than recent revenue and profit growth might justify.

If SM Energy’s pullback has you reassessing where momentum could build next, it might be worth scanning other names in the space, including aerospace and defense stocks as a fresh hunting ground for ideas.

With shares now trading at a steep discount to analyst targets despite double digit revenue and earnings growth, the key question is whether SM Energy is genuinely mispriced or if the market is already discounting future gains.

Most Popular Narrative: 42.9% Undervalued

With SM Energy last closing at 19.13 dollars against a narrative fair value of 33.50 dollars, the story hinges on how enduring its cash generation really is.

The company's ability to increase both net proved reserves and net production by over 60% since 2020, while also improving production margins and keeping share count flat, demonstrates ongoing operational excellence and scale. This allows for per-share financial growth and potential improvements in operating margins and earnings. Continued technological and operational optimization such as completion and well cost efficiencies aggressively applied in Uinta and Midland Basin assets are driving lower per-unit costs, enhancing production performance, and positioning SM Energy to better withstand commodity price volatility. This supports resilient net margins and free cash flow.

Read the complete narrative.

Want to see how steady growth, shifting margins, and a surprisingly low future earnings multiple combine to justify that higher fair value? The full narrative reveals the math behind that confidence.

Result: Fair Value of $33.50 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, concentrated exposure to a few shale basins and potential Uinta Basin bottlenecks could quickly undermine the bullish cash flow and rerating narrative.

Find out about the key risks to this SM Energy narrative.

Build Your Own SM Energy Narrative

If you see the story differently or just prefer digging into the numbers yourself, you can build a complete narrative in minutes: Do it your way.

A great starting point for your SM Energy research is our analysis highlighting 3 key rewards and 4 important warning signs that could impact your investment decision.

Looking for more high conviction ideas?

SM Energy might be compelling, but you will give up a powerful edge if you ignore other opportunities our screeners surface across sectors, themes, and styles.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.