STO share price in focus
Santos Ltd is one of Australia’s largest oil and gas companies. Founded in the 1950’s, Santos owns and operates one of Australia’s largest portfolios of oil and gas fields, connected by extensive pipelines and complementary facilities.
The company started life as an exploration-focused business, and the name is an acronym for South Australia Northern Territory Oil Search.
Santos has recently faced criticism and court cases over their climate action targets, with the ACCR accusing the company of greenwashing. At present, Santos’ stated goal is to achieve net-zero Scope 1 & 2 emissions by 2040, however this does not account for Scope 3 emissions (those generated by the use of their products) which account for more than 75% of the company’s total emissions.
ASX shares
ASX Limited operates Australia’s primary national securities exchange, providing a range of essential services beyond just hosting listed companies. Its offerings include the main registry, settlement, clearing services, and platforms for trading commodities and derivatives.
The company provides access to a wide array of tradeable products including shares, futures, exchange traded funds (ETFs), managed funds, and real estate investment trusts (REITs).
STO share price valuation
One way to have a ‘quick read’ of where the STO share price is could be to study something like dividend yield over time. This can give us a sense of the stability of the company and whether they can consistently pay out a percentage of profits.
Remember, the dividend yield is basically the ‘cash flow’ to a shareholder, but it can fluctuate year-to-year or between payments. Currently, Santos Ltd shares have a dividend yield of around 5.60%, compared to its 5-year average of 3.82%. In other words, STO shares are trading higher than their historical average dividend yield. Be careful how you interpret this information though – it could mean that dividends are growing, or it could mean the share price is falling, or both. In the case of STO, the annual report shows last year’s dividend was greater than the 3-year average, so the dividend has been growing.
Since ASX is more of a ‘growth’ company than an established blue chip, a price-sales ratio might be a more appropriate assessment. This ratio gives us an idea of how the company has historically been valued relative to its earnings, which can indicate if the company is over or undervalued today. The ASX share price currently trades at a price-sales ratio of 8.03x, which compares to its 5-year long-term average of 8.12x. So, ASX shares are trading lower than their historical average. Don’t forget, a simple multiple like this should only be the start of your research. The Rask websites offer free online investing courses, created by analysts explaining things like Discounted Cash Flow (DCF) and Dividend Discount Models (DDM). They even include free valuation spreadsheets! It’s a good idea to use multiple valuation methods to value a share like ASX Ltd.
