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Freehold Royalties Ltd. (TSE:FRU)
:FRU

Freehold Royalties (FRU) AI Stock Analysis

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Freehold Royalties

(OTC:FRU)

Rating:69Neutral
Price Target:
Freehold Royalties demonstrates strong financial performance and attractive valuation, boosted by high dividends. However, negative cash flow and bearish technical indicators are concerns. The restructuring and ongoing dividend payouts provide a positive outlook, though cash management remains a priority. The overall score reflects a balanced view, weighing profitability and strategic initiatives against current market sentiment and financial challenges.
Positive Factors
Acquisition Impact
The acquisition increased FRU's U.S. inventory by more than 20%, with the Midland Basin now comprising about 50% of FRU's U.S. production, leading to higher realized pricing.
Dividend Stability
FRU is capable of continuing to offer investors a stable and growing dividend as it executes on its U.S. expansion strategy.
Financial Position
The assets are expected to generate significant net royalty revenue, contributing to FRU's strong financial position.
Negative Factors
Commodity Prices
FRU is highlighted for investors seeking a stable and growing dividend while executing its U.S. expansion strategy, especially in a market with weaker commodity prices.

Freehold Royalties (FRU) vs. iShares MSCI Canada ETF (EWC)

Freehold Royalties Business Overview & Revenue Model

Company DescriptionFreehold Royalties Ltd., an oil and gas royalty company, owns working interests in oil, natural gas, natural gas liquids, and potash properties in Western Canada and the United States. The company holds approximately 6.2 million gross acres of land in Canada and 0.8 million gross drilling unit acres in the United States. It has royalty interests in approximately 15,000 producing wells and receives royalty from approximately 350 industry operators in North America. The company was founded in 1996 and is headquartered in Calgary, Canada.
How the Company Makes MoneyFreehold Royalties makes money by collecting royalty payments from oil and gas production on its lands. The company owns mineral titles and royalty interests that entitle it to a percentage of the revenue generated from the production of oil and gas. These royalties are typically based on production volumes and commodity prices. The company's revenue streams are significantly influenced by the performance of the oil and gas markets, as well as its ability to acquire and manage high-quality assets. Freehold Royalties also benefits from strategic partnerships with oil and gas operators who manage the day-to-day production activities on the lands, allowing Freehold to maintain a low-cost structure while generating revenue from its royalty interests.

Freehold Royalties Financial Statement Overview

Summary
Freehold Royalties showcases strong profitability and a solid balance sheet with manageable leverage. However, the recent revenue decline and negative free cash flow in 2024 highlight areas of concern that need close monitoring to maintain financial resilience.
Income Statement
75
Positive
Freehold Royalties has demonstrated strong revenue and profit growth over the years. The gross profit margin for 2024 is approximately 64.33%, which is a robust figure indicating efficient cost management. However, the company saw a decline in total revenue from 2023 to 2024 by approximately 1.62%, which may warrant attention. Net profit margin for 2024 is high at 48.29%, showcasing strong profitability. Both EBIT and EBITDA margins are unavailable for 2024, but previous years show consistent profitability.
Balance Sheet
80
Positive
The company maintains a healthy balance sheet with a debt-to-equity ratio of around 0.28 for 2024, indicating a conservative use of leverage. Return on equity (ROE) for 2024 is approximately 13.60%, reflecting efficient use of equity capital. The equity ratio stands at 74.16%, suggesting a strong equity base relative to total assets.
Cash Flow
65
Positive
Freehold Royalties experienced a significant decline in free cash flow in 2024, resulting in a negative figure, which could indicate potential cash management challenges. The operating cash flow to net income ratio for 2024 is approximately 1.49, showing strong cash generation relative to net income. However, the free cash flow to net income ratio is negative, highlighting the need for careful cash flow management.
Breakdown
Dec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income StatementTotal Revenue
309.48M314.57M393.02M206.19M89.96M
Gross Profit
199.06M305.08M281.72M118.17M10.56M
EBIT
0.00286.00M257.57M98.53M-4.42M
EBITDA
308.18M279.34M377.76M186.67M65.58M
Net Income Common Stockholders
149.45M131.90M209.19M72.08M-13.93M
Balance SheetCash, Cash Equivalents and Short-Term Investments
0.000.00524.00K2.19M1.03M
Total Assets
1.48B1.12B1.21B1.07B829.91M
Total Debt
302.31M124.59M158.28M147.81M94.91M
Net Debt
302.31M124.59M157.75M145.63M93.89M
Total Liabilities
383.02M194.66M251.66M179.54M170.47M
Stockholders Equity
1.10B923.76M960.34M890.97M659.44M
Cash FlowFree Cash Flow
-188.38M206.27M136.55M-214.98M62.13M
Operating Cash Flow
223.33M216.92M327.35M162.02M65.77M
Investing Cash Flow
-400.37M-21.18M-191.18M-376.61M-9.55M
Financing Cash Flow
177.03M-196.24M-138.08M215.78M-56.36M

Freehold Royalties Technical Analysis

Technical Analysis Sentiment
Positive
Last Price12.46
Price Trends
50DMA
11.96
Positive
100DMA
12.22
Positive
200DMA
12.63
Negative
Market Momentum
MACD
0.19
Negative
RSI
60.77
Neutral
STOCH
70.27
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:FRU, the sentiment is Positive. The current price of 12.46 is above the 20-day moving average (MA) of 11.87, above the 50-day MA of 11.96, and below the 200-day MA of 12.63, indicating a neutral trend. The MACD of 0.19 indicates Negative momentum. The RSI at 60.77 is Neutral, neither overbought nor oversold. The STOCH value of 70.27 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for TSE:FRU.

Freehold Royalties Peers Comparison

Overall Rating
UnderperformOutperform
Sector (57)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
TSFRU
69
Neutral
C$2.04B12.6215.22%8.56%-1.62%12.60%
57
Neutral
$7.06B3.07-3.48%5.79%0.59%-50.58%
$1.91B5.6130.45%
$1.99B1.8548.97%22.95%
$1.09B7.5229.87%6.55%
$3.96B24.688.39%4.32%
60
Neutral
C$2.20B20.388.83%-7.83%-45.69%
* Energy Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
TSE:FRU
Freehold Royalties
12.46
-0.11
-0.91%
ATHOF
Athabasca Oil
3.79
>-0.01
-0.26%
PRMRF
Paramount Resources
13.91
1.94
16.21%
CDDRF
Headwater Exploration
4.56
-0.72
-13.64%
PREKF
PrairieSky Royalty
16.79
-1.96
-10.45%
TSE:IPCO
International Petroleum Corporation
19.29
0.80
4.33%

Freehold Royalties Earnings Call Summary

Earnings Call Date:May 13, 2025
(Q1-2025)
|
% Change Since: 2.81%|
Next Earnings Date:Aug 12, 2025
Earnings Call Sentiment Positive
The earnings call highlighted significant strategic improvements, record production levels, and strong financial performance, particularly in the U.S. market. Despite some concerns about Canadian drilling activity and Permian rig counts, the positive aspects, including sustainable dividends and strategic positioning, strongly outweigh the negatives.
Q1-2025 Updates
Positive Updates
Structural Improvements and Governance Simplification
Freehold terminated the management agreement with Rife, simplifying governance and streamlining decision-making processes with a fully dedicated team, effective May 1, 2025.
Record Production Levels
Q1 production reached 16,248 BOE per day, the highest since Freehold's inception in 1996, with 65% liquids weighting contributing to $16 million in funds from operations.
U.S. Production Premium
Realized pricing averaged $72.64 BOE in the U.S., a 47% premium over Canadian production, driven by higher oil weighting and lower transportation costs.
Robust Leasing Activity
Q1 leasing of U.S. mineral title lands reached $3.3 million, a new high watermark, with a total contribution of $3.9 million in revenue from leases in Canada and the U.S.
Heavy Oil Production Growth
Heavy oil production increased by 19% from Q1 2024, with strong activity levels in Clearwater and Mannville Stack.
Strategic Positioning in Permian Basin
Freehold is strategically growing its portfolio in the Permian Basin, focusing on undeveloped benches and drilling spacing units to maximize production growth.
Sustainable Dividend Strategy
The dividend of $1.08 per share is sustainable with oil prices around US$50, supported by a multi-decade inventory of drilling locations.
Negative Updates
Canadian Drilling Activity Softening
There was a pullback in Canadian drilling activity, particularly in the Viking, though this was partially offset by increased activity in oil-weighted plays.
Permian Rig Count Concerns
While efficiency has improved, there is concern about the declining rig count in the Permian, even though overall production remains steady.
Company Guidance
During the Q1 Results Conference Call, Freehold highlighted several key metrics and strategic moves. The company achieved a production level of 16,248 BOE per day, the highest since its inception in 1996. Liquids weighted production was 65%, contributing to $16 million in funds from operations, or $0.42 per share. The average realized pricing was $49.25 BOE in Canada and $72.64 BOE in the U.S., reflecting a 47% premium in the U.S. Additionally, the U.S. mineral title lands set a new leasing record at $3.3 million for the quarter. Freehold's exploration activity increased by 12% from Q4 2024, with significant growth in heavy oil production up by 19% year-over-year. The company also discussed a new Normal Course Issuer Bid (NCIB) to provide flexibility in return of capital and mentioned maintaining a 60% payout ratio for dividends. With a focus on strategic acquisitions, Freehold aims to optimize its portfolio, particularly in the Permian Basin, and sustain shareholder returns with an annual dividend of $1.08 per share, supported by oil prices around $50 West Texas Intermediate.

Freehold Royalties Corporate Events

Executive/Board ChangesBusiness Operations and Strategy
Freehold Royalties Restructures Business with New Dedicated Leadership
Positive
Apr 30, 2025

Freehold Royalties Ltd. has announced the termination of its management agreement with Rife Resources Management Ltd., effective May 1, 2025, marking a significant shift in its business structure. This transition to a dedicated executive team is expected to streamline operations and simplify governance, reinforcing Freehold’s position as a leading North American royalty company, with continued support from its largest shareholder, CN Investment Division.

Spark’s Take on TSE:FRU Stock

According to Spark, TipRanks’ AI Analyst, TSE:FRU is a Outperform.

Freehold Royalties’ overall score reflects strong financial performance and valuation, offset by negative cash flow concerns and bearish technical indicators. The company’s strategic growth initiatives and high dividend yield offer a positive long-term outlook, but cash flow management remains a priority.

To see Spark’s full report on TSE:FRU stock, click here.

Dividends
Freehold Royalties Declares April 2025 Dividend
Positive
Apr 15, 2025

Freehold Royalties Ltd. has announced a dividend of Cdn. $0.09 per common share, payable on May 15, 2025, to shareholders of record as of April 30, 2025. This announcement reflects Freehold’s ongoing commitment to providing value to its shareholders and underscores its stable financial position within the energy royalty sector.

Spark’s Take on TSE:FRU Stock

According to Spark, TipRanks’ AI Analyst, TSE:FRU is a Neutral.

Freehold Royalties’ strong financial performance and attractive valuation are somewhat offset by negative cash flow issues and bearish technical indicators. Strategic growth initiatives and high dividend yield provide positive outlooks, but cash flow management and market sentiment need attention.

To see Spark’s full report on TSE:FRU stock, click here.

M&A TransactionsBusiness Operations and StrategyFinancial Disclosures
Freehold Royalties Reports Strong 2024 Results and Strategic Growth
Positive
Mar 12, 2025

Freehold Royalties Ltd. reported strong financial and operational results for 2024, with significant revenue and funds from operations. The company achieved a notable increase in production and reserves, driven by organic growth and strategic acquisitions, including a major acquisition in the Midland Basin. These results underscore Freehold’s robust industry positioning and potential for future growth, benefiting stakeholders through increased dividends and enhanced asset value.

Dividends
Freehold Royalties Announces February 2025 Dividend
Positive
Feb 13, 2025

Freehold Royalties has announced a dividend of Cdn. $0.09 per common share, payable on March 17, 2025, to shareholders of record as of February 28, 2025. This declaration continues to position Freehold as a significant player in the energy royalty sector, providing shareholders with regular income and reinforcing its stable financial outlook.

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.