Permian Resources

Permian Resources Corp earns a 3-star quantitative star rating, illustrating our stance that this share class is a balanced choice, but prudent investors should consider looking elsewhere. The stock currently trades at a minor 2% discount to our quantitative fair value estimate of $21.59 per share; however, caution is warranted due to this estimate's high uncertainty rating.

The firm's profitability strengthens our estimated valuation. Highly profitable companies are often more resilient in recessions and are likely to generate stronger future cash flows for shareholders. Reflecting the firm's profitability is its EBITDA margin of 80.8%, which falls in the top 10% compared with peers globally. This company's ability to turn revenue into cash flow is bolstered by its solid EBITDA margin, which is wider than peers. We believe this is a sign that shares could be cheap.

The company's solid growth is an additional encouraging factor. Consistent revenue and earnings growth indicates a company's potential for increased market share and profitability. The firm's revenue 3-year growth of 37.8%, for example, falls in the top 10% compared with global peers. Robust trailing three-year revenue growth portends a favorable future trajectory, which further promotes our favorable price/fair value ratio.

In addition to the aforementioned drivers, our model considers momentum as part of its comprehensive analysis. This share class has outperformed the broader universe over the past year. While we believe the stock is undervalued, this outperformance had a negative impact on our valuation estimate.

With its quantitative economic moat rating of none, this business is unlikely to consistently outearn its cost of capital without structural protection from competition. Additionally, the firm's moderate financial health score suggests it is acceptably positioned against adverse economic circumstances.