Sitio Royalties (STR) AI Stock Analysis

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Sitio Royalties

(NYSE:STR)

65Neutral

Sitio Royalties exhibits strong financial growth and positive earnings call sentiment, which are significant positive factors. However, high leverage and valuation concerns pose notable risks. The technical analysis suggests a cautious approach due to mixed signals. Investors should weigh the high dividend yield against the potential financial risks associated with the company's leverage.

Sitio Royalties (STR) vs. S&P 500 (SPY)

Market Cap

$2.79B

Dividend Yield7.84%

Average Volume (3M)845.21K

Price to Earnings (P/E)35.5

Beta (1Y)0.94

Revenue Growth7.18%

EPS GrowthN/A

CountryUS

Employees72

SectorEnergy

Sector Strength52

IndustryIndustrial Materials

Share Statistics

EPS (TTM)0.13

Shares Outstanding77,517,670

10 Day Avg. Volume746,668

30 Day Avg. Volume845,214

Financial Highlights & Ratios

PEG Ratio0.11

Price to Book (P/B)0.49

Price to Sales (P/S)0.00

P/FCF Ratio4.33

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$24.50

Price Target Upside32.43% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering5

Sitio Royalties Business Overview & Revenue Model

Company DescriptionSitio Royalties Corp. operates as oil and gas mineral and royalty company. The company acquires oil-weighted rights in productive and the United States basins. It has approximately 140,000 net royalty acres through the consummation of over 180 acquisitions. The company was founded in 2016 and is headquartered in Denver, Colorado.

How the Company Makes MoneySitio Royalties makes money by acquiring oil and gas mineral rights and royalty interests in productive onshore basins. These acquisitions allow the company to earn revenue in the form of royalties from oil and gas production, which are paid by the operators of the wells on their properties. The royalties are typically calculated as a percentage of the production revenue generated by these wells. Sitio Royalties' revenue model is primarily driven by the volume of oil and gas produced and the prevailing market prices for these commodities. The company strategically grows its portfolio through acquisitions and partnerships, focusing on assets with high potential for long-term revenue generation.

Sitio Royalties Financial Statement Overview

Summary

Sitio Royalties shows strong revenue growth and improved profitability, which are positive signs for its income statement. However, the high leverage and negative equity present significant balance sheet risks. While the positive trend in free cash flow is encouraging, the company's reliance on operating cash flows suggests a need for caution. Overall, the company's financial health is improving but remains susceptible to financial risks.

Income Statement

Positive

Sitio Royalties has displayed robust revenue growth, with total revenue increasing significantly from $456.99 million in 2020 to $624.41 million in 2024. The net profit margin improved notably, moving from a net loss in 2020 to a net income of $130.80 million in 2024. The EBIT and EBITDA margins have also increased, indicating enhanced operational efficiency. However, fluctuations in net income in previous years indicate some volatility.

Balance Sheet

Negative

The company's balance sheet shows high leverage, with a substantial debt-to-equity ratio due to negative stockholders' equity in 2024. This poses significant financial risk. The equity ratio has deteriorated, reflecting reduced financial stability. On a positive note, the company has increased its total assets over time but must manage its liabilities better to improve financial health.

Cash Flow

Positive

The cash flow statements reveal positive free cash flow, which is a strong indicator of liquidity. Free cash flow grew from negative in 2020 to $462.43 million in 2024. However, the operating cash flow to net income ratio indicates heavy reliance on operating cash flows to sustain profitability, highlighting potential risk if operational performance declines.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
624.41M	593.36M	369.61M	120.59M	45.70M
	Gross Profit
624.41M	423.27M	265.10M	79.68M	13.65M
	EBIT
203.01M	35.39M	193.99M	49.87M	-3.22M
	EBITDA
518.40M	323.75M	354.24M	90.78M	7.98M
	Net Income Common Stockholders
40.95M	-15.54M	184.18M	47.49M	-14.21M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
3.29M	15.20M	18.82M	12.38M	2.72M
	Total Assets
4.74B	4.76B	5.17B	1.20B	275.73M
	Total Debt
1.09B	872.46M	945.76M	134.00M	39.80M
	Net Debt
1.08B	857.26M	926.94M	121.62M	37.08M
	Total Liabilities
1.39B	1.16B	1.28B	139.71M	47.33M
	Stockholders Equity
-1.32B	1.61B	1.72B	560.62M	139.76M
Cash Flow		Free Cash Flow
462.43M	316.95M	-393.45M	27.19M	-9.82M
	Operating Cash Flow
462.43M	487.50M	164.96M	65.93M	26.02M
	Investing Cash Flow
-329.96M	-59.73M	-558.10M	-38.74M	-21.56M
	Financing Cash Flow
-144.37M	-431.40M	399.20M	-22.34M	-15.06M

Sitio Royalties Technical Analysis

Technical Analysis Sentiment

Positive

Last Price18.50

Price Trends

50DMA

18.15

Positive

100DMA

18.95

Negative

200DMA

20.36

Negative

Market Momentum

MACD

>-0.01

Negative

RSI

59.17

Neutral

STOCH

73.47

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For STR, the sentiment is Positive. The current price of 18.5 is above the 20-day moving average (MA) of 17.07, above the 50-day MA of 18.15, and below the 200-day MA of 20.36, indicating a neutral trend. The MACD of >-0.01 indicates Negative momentum. The RSI at 59.17 is Neutral, neither overbought nor oversold. The STOCH value of 73.47 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for STR.

Sitio Royalties Peers Comparison

Overall Rating

UnderperformOutperform

Sector (56)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
STR	65 Neutral	$2.79B	35.54	2.86%	7.84%	7.18%	―
MTRN	65 Neutral	$1.62B	166.02	1.14%	0.71%	6.97%	-87.87%
GSM	63 Neutral	$757.70M	27.86	-7.29%	1.42%	-4.98%	-192.96%
NEXA	58 Neutral	$682.06M	―	-20.22%	―	6.28%	29.57%
Sector *	56 Neutral	$7.17B	3.84	-4.86%	5.83%	0.24%	-51.87%
MP	56 Neutral	$3.59B	―	-9.62%	―	4.63%	-3189.81%
TMC	42 Neutral	$1.13B	―	-667.42%	―	―	-3.49%

* Energy Sector Average

Performance Comparison

STR

Sitio Royalties

18.50

-4.11

-18.18%

MTRN

Materion

77.83

-33.79

-30.27%

GSM

Ferroglobe

4.06

-1.45

-26.32%

NEXA

Nexa Resources SA

5.28

-2.17

-29.13%

MP Materials

21.14

2.72

14.77%

TMC

TMC the metals company Inc.

3.14

1.68

115.07%

Sitio Royalties Earnings Call Summary

Earnings Call Date:May 07, 2025

(Q1-2025)

% Change Since: 8.70%|

Next Earnings Date:Aug 06, 2025

Earnings Call Sentiment Positive

The earnings call presented a strong performance with record production, robust financial results, strategic acquisitions, and high margins. However, there is caution due to the uncertainty in commodity prices and potential production decline. The overall sentiment leans positive but acknowledges challenges in the market environment.

Q1-2025 Updates

Positive Updates

Record Production and Robust Activity

The first quarter of 2025 marked another record quarter of production for Sitio, supported by robust drilling and completion activity. Total production increased by 3% quarter-over-quarter, averaging over 42,000 BOE per day. Net wells turned in line were up 34% from the previous quarter.

Strong Financial Performance

Adjusted EBITDA was $142 million, a 1% increase from the prior quarter. Net income also rose to $26 million, representing a 36% increase over the same period. The results exceeded consensus estimates.

Strategic Acquisitions and Shareholder Returns

Over $20 million of acquisitions added 1,315 net royalty acres. The company repurchased 1.1 million shares for $22 million, equating to $0.15 per share in repurchases. A cash dividend of $0.35 per share was declared, with a total return of capital of $0.50 per share.

Lean Cost Structure and High Margins

Sitio reported a lean cost structure with adjusted EBITDA margins at 90%. The company is positioned to generate meaningful free cash flow even in lower commodity price environments.

Increased Inventory and Operator Quality

Inventory increased by 40 additional net normalized locations, a 10% quarter-over-quarter increase. The company has a diverse portfolio with operators like Exxon, Chevron, and Conoco.

Negative Updates

Uncertainty in Commodity Prices

The company updated its full-year 2025 cash taxes guidance to reflect lower anticipated commodity prices, reducing the estimate by $5 million.

Potential Decline in Production Trajectory

Despite strong first-quarter results, the unchanged full-year guidance implies declining volumes, potentially indicating a slowdown from operators due to commodity price volatility.

Company Guidance

During the Sitio Royalties first quarter 2025 earnings call, the company highlighted several key operational and financial metrics. Production reached a record level, increasing by 3% quarter-over-quarter to over 42,000 BOE per day, while net wells turned in line rose by 34% from Q4 2024. The company completed over $20 million in acquisitions, adding 1,315 net royalty acres, and reported an adjusted EBITDA of $142 million, up 1% from the previous quarter. Net income grew by 36% to $26 million, exceeding consensus estimates. The company declared a quarterly cash dividend of $0.35 per share and executed share repurchases totaling 1.1 million shares for $22 million, with a total return of capital of $0.50 per share. The Board extended the buyback plan, authorizing an additional $300 million in share repurchases, with current capacity at approximately $350 million. Sitio reported $1.1 billion in debt with $439 million available under its revolving credit facility, and adjusted net debt to free cash flow was approximately half of the peer group average. The company also updated its 2025 cash taxes guidance, reducing the estimate by $5 million to $23 million due to lower anticipated commodity prices.

Sitio Royalties Corporate Events

Private Placements and FinancingBusiness Operations and Strategy

Sitio Royalties Amends Credit Agreement with JPMorgan

Neutral

May 12, 2025

On May 8, 2025, Sitio Royalties Operating Partnership, LP, along with other guarantors, amended its Third Amended and Restated Credit Agreement with JPMorgan Chase Bank and other lenders. This Fifth Amendment reaffirmed the borrowing base at $925 million and adjusted certain terms and dates related to the semi-annual redetermination of the borrowing base, impacting the company’s financial operations and credit structure.

The most recent analyst rating on (STR) stock is a Buy with a $28.00 price target. To see the full list of analyst forecasts on Sitio Royalties stock, see the STR Stock Forecast page.

Spark’s Take on STR Stock

According to Spark, TipRanks’ AI Analyst, STR is a Neutral.

Sitio Royalties demonstrates strong financial performance with robust revenue growth and profitability. However, the high leverage and negative equity are significant risks. The technical indicators suggest a bearish trend, while valuation metrics indicate the stock may be overvalued but offer a high dividend yield. The recent earnings call was positive, highlighting strong production and financial results, but potential challenges in commodity prices and production could impact future performance. Overall, the stock is positioned in the mid-range due to mixed financial health and market conditions.

To see Spark’s full report on STR stock, click here.

Executive/Board Changes

Sitio Royalties Announces Departure of Chief Accounting Officer

Neutral

Feb 28, 2025

On February 27, 2025, Sitio Royalties Corp. announced the departure of Dawn Smajstrla as Chief Accounting Officer, which was not due to any disagreements with the company. The responsibilities have been temporarily assumed by Carrie Osicka, the Chief Financial Officer, without any change in her compensation. The company plans to enter into a separation agreement with Ms. Smajstrla, providing her with benefits under their Severance Plan, contingent upon her signing a general release of claims.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.