Diamondback Energy, Inc. (FANG) Stock Analysis
Diamondback Energy, Inc. (FANG) Stock Analysis
Overall Grade: F (Concerning)
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Diamondback Energy, Inc. faces challenges in financial performance that warrant careful analysis.
Key Metrics:
| Metric | Value | Context |
|---|---|---|
| ROIC | 1.6% | Below expectations |
| FCF Margin | 58.3% | Strong cash generation |
| Debt/Equity | 0.4x | Conservative leverage |
Investment Thesis: Healthy free cash flow margin of 58.3% provides financial flexibility for growth and shareholder returns.
What is Diamondback Energy, Inc.'s Profitability and ROIC?
Diamondback Energy, Inc.'s return on invested capital of 1.6% is below the typical cost of capital.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| Return on Invested Capital (ROIC) | 1.6% | Red flag | Below cost of capital |
| Return on Equity (ROE) | 4.3% | Warning | Moderate equity returns |
| Operating Margin | 8.4% | Adequate | Moderate operational efficiency |
How Strong is Diamondback Energy, Inc.'s Cash Flow Quality?
Diamondback Energy, Inc. generated $8.8B in free cash flow over the trailing twelve months, representing a 58.3% margin. Cash earnings quality is strong, with operating cash flow exceeding net income by 5.3x.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| Free Cash Flow Margin | 58.3% | Excellent | Excellent cash conversion |
| Free Cash Flow (TTM) | $8.8B | Good | Positive cash generation |
| OCF/Net Income | 5.3x | Excellent | High earnings quality |
| FCF Consistency (8Q) | N/A | Warning | Variable cash flow |
What is Diamondback Energy, Inc.'s Financial Health?
Diamondback Energy, Inc.'s debt-to-equity ratio of 0.4x indicates conservative leverage.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| Debt to Equity | 0.4x | Good | Conservative capital structure |
| Net Cash Position | $-14.4B | Warning | Net debt position |
Is Diamondback Energy, Inc. Stock Overvalued or Undervalued?
Diamondback Energy, Inc. trades at a P/E of 26.2x, representing a premium to the sector median of N/A. Free cash flow yield of 20.2% offers attractive cash returns.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| P/E Ratio | 26.2x | Adequate | Premium valuation |
| EV/Sales | 3.8x | Good | Growth premium priced in |
| FCF Yield | 20.2% | Excellent | Attractive cash return |
| Dividend Yield | 2.7% | Adequate | Growth focus over income |
Sector Rankings
| Metric | Value | Percentile | vs Median |
|---|---|---|---|
| Return on Invested Capital (ROIC) | 1.6% | Bottom 25% | 0.2x below |
| Free Cash Flow Margin | 58.3% | Top 25% | 7.6x above |
| Operating Margin | 8.4% | Bottom 50% | 0.8x below |
| Return on Equity (ROE) | 4.3% | Bottom 50% | 0.6x below |
| P/E Ratio | 26.2x | N/A | - |
Rating Thresholds
Return on Invested Capital (ROIC)
Measures how efficiently a company uses its debt and equity capital to generate profits. ROIC above 15% typically indicates a competitive moat.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 20% | Exceptional capital efficiency, strong competitive moat |
| Good | 12% - 20% | Above-average returns, sustainable competitive position |
| Adequate | 8% - 12% | Around cost of capital, moderate competitive position |
| Warning | 4% - 8% | Below cost of capital, value may be eroding |
| Red flag | < 4% | Significant capital destruction, fundamental issues |
Current: 1.6% (Red flag - Bottom 25% of sector (median: 7.2%))
Free Cash Flow Margin
The percentage of revenue converted to free cash flow. Higher margins indicate stronger cash generation and business quality.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 20% | Strong cash generation, high-quality business |
| Good | 10% - 20% | Healthy cash conversion |
| Adequate | 5% - 10% | Moderate cash generation |
| Warning | 0% - 5% | Thin cash margins, capital intensive |
| Red flag | < 0% | Cash burn, potential liquidity concerns |
Current: 58.3% (Excellent - Top 25% of sector (median: 7.7%))
Debt to Equity Ratio
Total debt divided by shareholders' equity. Lower ratios indicate more conservative financing and reduced financial risk.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | < 0.3x | Conservative leverage, strong balance sheet |
| Good | 0.3x - 0.7x | Moderate leverage, healthy financial position |
| Adequate | 0.7x - 1.5x | Elevated leverage, monitor closely |
| Warning | 1.5x - 3.0x | High leverage, increased financial risk |
| Red flag | > 3.0x | Excessive leverage, potential distress risk |
Current: 39.2% (Good)
P/E Ratio (Price-to-Earnings)
Stock price divided by earnings per share. Lower P/E may indicate undervaluation, while higher P/E suggests growth expectations.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | < 15x | Attractively valued, potential opportunity |
| Good | 15x - 25x | Fair value for quality company |
| Adequate | 25x - 35x | Growth premium, justify with earnings growth |
| Warning | 35x - 50x | High expectations priced in |
| Red flag | > 50x or negative | Speculative valuation or losses |
Current: 26.2x (Adequate)
Free Cash Flow Yield
Free cash flow per share divided by stock price. Higher FCF yield indicates better cash return relative to valuation.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 8% | High cash return, potential value opportunity |
| Good | 5% - 8% | Solid cash yield |
| Adequate | 3% - 5% | Moderate cash return |
| Warning | 1% - 3% | Low cash yield, growth expectations |
| Red flag | < 1% | Minimal cash return to shareholders |
Current: 20.2% (Excellent)
Frequently Asked Questions
Q: What is Diamondback Energy, Inc.'s Return on Invested Capital (ROIC)?
Diamondback Energy, Inc. (FANG) has a trailing twelve-month Return on Invested Capital (ROIC) of 1.6%. This compares below the sector median of 7.2%. An ROIC below 8% suggests the company may be destroying shareholder value.
Q: What is Diamondback Energy, Inc.'s Free Cash Flow Margin?
Diamondback Energy, Inc. (FANG) has a free cash flow margin of 58.3%, generating $8.8 billion in free cash flow over the trailing twelve months. A FCF margin above 20% indicates excellent cash conversion and a high-quality business model.
Q: Is Diamondback Energy, Inc. stock overvalued or undervalued?
Diamondback Energy, Inc. (FANG) trades at a P/E ratio of 26.2x, which is above the sector median of N/A. The EV/Sales multiple is 3.8x. Free cash flow yield is 20.2%, which represents an attractive cash return to investors.
Q: Does Diamondback Energy, Inc. pay a dividend?
Diamondback Energy, Inc. (FANG) currently pays a dividend yield of 2.7%. Including share buybacks, the total shareholder yield is 6.6%. This yield is moderate, suggesting a balance between income and growth reinvestment.
Q: What is Diamondback Energy, Inc.'s revenue and earnings growth?
Diamondback Energy, Inc. (FANG) grew revenue by 35.8% year-over-year. Earnings per share decreased by 63.3% compared to the prior year. Double-digit revenue growth indicates strong demand and market share gains.
Q: Is Diamondback Energy, Inc. buying back stock?
Diamondback Energy, Inc. (FANG) repurchased $1.7 billion of stock over the trailing twelve months. This represents a buyback yield of 3.9%.
Q: How does Diamondback Energy, Inc. compare to competitors in Energy?
Compared to other companies in Energy, Diamondback Energy, Inc. (FANG) shows: ROIC of 1.6% is below the sector median of 7.2% (Bottom 18%). FCF margin of 58.3% exceeds the sector median of 7.7% (Top 14% of sector). These rankings are based on MetricDuck's analysis of all Energy companies with available SEC filings.
Q: What warning signs should I watch for with Diamondback Energy, Inc.?
Investors in Diamondback Energy, Inc. (FANG) should monitor these potential warning signs: 1) ROIC has been declining, potentially signaling deteriorating competitive position. Regular monitoring of SEC filings and quarterly trends is recommended.
Data Source: Data sourced from 10-Q filed 2025-11-05. TTM metrics as of Q4 2025.
Methodology: Financial metrics calculated from SEC 10-K and 10-Q filings using standardized formulas. Sector comparisons use peer group based on SIC code.
This analysis is for informational purposes only and does not constitute investment advice.