With its stock down 28% over the past three months, it is easy to disregard Par Pacific Holdings (NYSE:PARR). But if you pay close attention, you might gather that its strong financials could mean that the stock could potentially see an increase in value in the long-term, given how markets usually reward companies with good financial health. Specifically, this article will study Par Pacific Holdings' ROE.

Return on equity or ROE is a key measure used to assess how efficiently a company's management is utilizing the company's capital. In short, ROE shows the profit each dollar generates with respect to its shareholder investments. Par Pacific Holdings' ROE is an impressive 37%, which is significantly higher than the industry average of 18%. This suggests that the company is generating substantial profits relative to its shareholders' investments.

Financials

Looking at Par Pacific's financial performance, the company has delivered robust results. In the fiscal year 2023, Par Pacific reported annual net income of $728.6 million, annual revenue of $8.23 billion, annual operating cash flow of $670.8 million, and annual free cash flow of $588.5 million. These strong financial metrics demonstrate the company's ability to generate substantial profits and cash flows.

Quarterly Performance

Diving into the quarterly performance, Par Pacific reported adjusted EBITDA of $95 million and adjusted net income of $0.69 per share in the first quarter of 2024. The company's Retail and Logistics business units delivered stable earnings contributions, while the Refining segment positioned itself to increase production during the profitable summer driving season.

Recent Developments

The Billings refinery, which Par Pacific acquired in 2023, is in the process of restarting, further improving the company's summer operating position. Global product inventories are currently low and well-balanced, with limited supply-side support. Incremental Chinese exports are expected to be flat to down year-over-year, and national policies remain focused on adequate local market supply for both transportation fuels and petrochemicals.

Retail Performance

Additionally, Par Pacific's retail brands continue to build momentum, with same-store fuel and merchandise sales growth of 6% and 5%, respectively, in the first quarter of 2024. The company's relatively young brands are well-received in the local markets it serves, as demonstrated by the above-trend growth rates.

Renewable Fuel Initiatives

Progress continues on Par Pacific's renewable fuel initiatives. In Hawaii, the $90 million renewable hydrotreater project is tracking on time and on budget, and the renewable fuel cogeneration project with Hawaiian Electric is progressing towards a potential power purchase agreement. In Tacoma, the company is pivoting from the larger SAF and green hydrogen project to assess lower capital, high-return opportunities.

Liquidity

Par Pacific's balance sheet remains well-positioned, with more than $575 million of liquidity as of March 31, 2024. The company has further reduced its cost of debt capital and repurchased more than $70 million of its stock at attractive prices year-to-date. This strong financial position allows Par Pacific to pursue its strategic objectives while opportunistically repurchasing its common stock.

Outlook

Looking ahead, the company is focused on safe and reliable operations, crisp project execution, and thoughtful capital allocation. Par Pacific is committed to managing risks and positioning its enterprise to generate strong returns through the cycle.

Business Overview

Geographically, Par Pacific operates refineries in Hawaii, Wyoming, Washington, and Montana, as well as a retail network in Hawaii, Washington, and Idaho. The company's refining segment generated $1.93 billion in revenue in the first quarter of 2024, with the Hawaii refinery contributing the largest share. The Logistics segment reported $71.8 million in revenue, while the Retail segment generated $140.1 million.

Revenue Breakdown

In terms of revenue breakdowns, the Refining segment's revenue was driven primarily by gasoline and distillates sales, which accounted for 68% and 43% of total refining revenue, respectively. The Logistics segment's revenue was largely derived from transportation and terminalling services, while the Retail segment's revenue came from fuel sales and merchandise.

Conclusion

Overall, Par Pacific's strong financial performance, strategic initiatives, and well-positioned balance sheet suggest that the market may be undervaluing the company's long-term potential. The company's focus on safe and reliable operations, disciplined capital allocation, and opportunistic share repurchases position it well to navigate the current market environment and capitalize on future growth opportunities.