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SM Energy (SM) Sees Earnings Estimates Rise, Is The Stock Still Undervalued?

Simply Wall St · 1d ago

Recent analyst coverage of SM Energy (SM) has centered on sizeable upward revisions to earnings estimates, following a stretch of earnings and revenue results that routinely topped expectations and left the stock trading at a peer discount.

Recent swings in SM Energy’s share price have been sharp, with the stock down 0.8% on the day yet still carrying a 7 day share price return of 8.4% and a 90 day gain of 26.5%. The year to date share price return of 99.8% and 1 year total shareholder return of 80.1% point to momentum that has already been strong rather than just emerging.

Scan beyond SM Energy and see how it stacks up against a hand picked 32 high quality undervalued stocks that also pair solid cash generation with disciplined balance sheets.

SM Energy has the earnings revisions, balance sheet discipline and recent share price run that many investors look for in a high quality operator. The real tension now is how that strength lines up with today’s valuation.

Most Popular Narrative: 13.9% Undervalued

On the most followed view, SM Energy screens as undervalued, with a fair value estimate of $44.41 against a last close of $38.22. This puts the recent rally in the context of a wider gap between price and modeled fundamentals.

The main thing that has to go right is that SM Energy continues to execute on its free cash flow maximization plan, including delivering the remaining merger synergies, holding capital roughly steady while maintaining the production profile, and using excess cash to reduce debt toward low 1x leverage before increasing buybacks.

The current valuation implies the market is still applying a discount to SM Energy despite synergy capture, debt reduction, and existing buybacks. This is consistent with a view that the stock is undervalued and that successful delivery on this plan would need a higher share price to reflect those fundamentals.

See why 46 investors see SM Energy as 14% undervalued.

Result: Fair Value of $44.41 (UNDERVALUED)

Still, this story can break if SM Energy’s sizeable debt load becomes harder to service, or if regulatory pushback in places like the DJ Basin slows drilling.

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

Next Steps

The mixed sentiment around SM Energy is clear, with both rewards and risks pulling investor expectations in different directions. If you want to move fast and build an informed stance rather than rely on the headline takeaway, start by weighing the 5 key rewards and 3 important warning signs.

Looking for more investment ideas beyond SM Energy?

If you already have a view on SM Energy, use that momentum to sharpen your watchlist. Fresh opportunities do not wait around for late research.

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.