STO share price in focus
Santos Ltd, founded in the 1950s, is one of Australia’s largest oil and gas companies. The company owns and operates an extensive portfolio of oil and gas fields, supported by a network of pipelines and complementary facilities.
Initially established as an exploration-focused business, its name is an acronym for South Australia Northern Territory Oil Search.
In recent years, Santos has faced criticism and legal challenges regarding its climate action targets, with the ACCR accusing the company of greenwashing. Santos has committed to achieving net-zero Scope 1 and 2 emissions by 2040, but this target excludes Scope 3 emissions—those generated by the use of its products—which account for over 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).
ASX’s dominance in the Australian market gives it a significant edge over smaller competitors. In fact, many Australians may not even be aware of the alternative exchanges on the market!
STO & ASX share price valuation
We would consider STO to be a ‘mature’ or ‘blue-chip’ business, so some of the metrics that could be worth considering include the debt/equity ratio, average yield, and return on equity, or ROE. These measures give us a sense of the company’s debt levels, their ability to generate returns from their assets, and their ability to consistently return profits to shareholders.
For CY23, Santos Ltd reported a debt/equity ratio of 40.3%, meaning the company has more equity than debt.
Over the last 5 years, STO has delivered an average dividend yield of 3.8% per year. This is important to note if you’re looking for income from your investments.
Finally, in CY23, STO reported an ROE of 9.4%. For a mature business you generally want to see an ROE of more than 10%, so STO’s returns are a bit less than what we’d expect.
As a growth company, some of the trends we might consider from ASX shares include revenue growth, profit growth, and return on equity (ROE). I say ‘trends’ because it’s always important to look at these figures over a few years. The trend is much more valuable info than a single measure at one point in time.
Over the last 3 years, ASX has increased revenue at a rate of 15.8% per year to hit $1,581m in FY24. Meanwhile, net profit has fallen from $481m to $474m. ASX’s last reported ROE was 12.9%.
Please keep in mind that context is important. These metrics give us some indication of company performance, but it’s just the start of valuing STO or ASX shares. To learn more about valuation, check out one of our free online investing courses.
