SM Energy Company Common Stock (SM)

FairStock Score: 66/100 — STEADY

Key Financials

Strengths

• Generates $207 million in annual free cash flow (2.9% yield on market cap)
• Solid return on equity of 14.3% above cost of capital
• Attractive 2.8% dividend yield providing steady income returns

Concerns

• Revenue declining at 16.0% year-over-year signals potential demand weakness or market share loss
• Altman Z-Score of 1.5 places it in the financial distress zone—elevated bankruptcy risk

AI Analysis

SM Energy Company Common Stock is a small-cap energy company valued at $7.1 billion. The business generates $3.0 billion in annual revenue with a 3.6% net margin and $207 million in free cash flow. From a quality standpoint, SM shows distressed Altman Z-Score of 1.5 warrants caution and adequate 14% ROE. On valuation, the stock is deeply undervalued on a P/E basis at 5.2x, with offers a 60% margin of safety vs Graham Number of $73. Growth dynamics show revenue growing at -16.0% and profit growth of -42.1%. The 2.8% dividend yield adds an income component for patient holders. Our composite FairStock Score of 66/100 reflects above-average fundamentals overall. This combination of reasonable valuation, solid returns, and conservative leverage makes it worth a closer look for value-oriented portfolios.

Bull Case

The market underappreciates SM's consistent 14% ROE at just 5x earnings—a re-rating toward sector peers could unlock 30-50% upside. With $207 million in annual free cash flow (2.9% yield), management has ample capital for buybacks, dividends, or accretive acquisitions.

Bear Case

Macro headwinds or sector-specific disruption could pressure margins, particularly if competitive intensity increases in the energy space. Regulatory changes, input cost inflation, or demand normalization represent underappreciated risks that could materially impact forward estimates.

Data from SEC filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer