Permian Resources Corporation: The Undervalued Energy Gem Hedge Funds Are Buying

The energy sector has long been a battleground for value investors, but few companies have captured the attention of hedge funds like Permian Resources Corporation (NYSE: PR) in 2025. With a forward price-to-earnings (P/E) ratio of just 9.45 and a 15.44% year-over-year revenue surge, PR has emerged as a top undervalued play in a market increasingly dominated by AI-driven hype. Let’s dissect the data behind its appeal—and why investors should proceed with cautious optimism.

Why Hedge Funds Love PR

Hedge funds hold PR in high regard, with 54 funds collectively owning shares as of May 2025. The company’s valuation metrics are compelling:
- Revenue growth: $1.3 billion in Q4 2024 revenue, up 15.44% from 2023.
- Cash flow: $3.4 billion in operating cash flow for FY 2024, supporting a $1.4 billion free cash flow.
- Production: A 64% year-over-year oil production increase in 2024, driven by $1.2 billion in acquisitions that added 50,000 net acres and 20,000 barrels of oil equivalent per day (boe/d).

Financial Fortitude

PR’s operational efficiency is a standout. Drilling costs have dropped 14% year-over-year to $775 per lateral foot, a metric that bodes well for scalability. Its balance sheet is robust, with $3 billion in liquidity and a leverage ratio of 0.95x—far stronger than peers like Ovintiv (OVV), which trades at a 3.23x EV/EBITDA multiple. PR’s 2025 capital budget of $1.9–$2.1 billion prioritizes production growth while maintaining a 4.3% dividend yield, outpacing the sector average.

Institutional Backing

Quant-driven hedge fund Renaissance Technologies (RenTech) has been a vocal supporter, increasing its stake by 20% in Q2 2024. This institutional confidence is critical for small-cap stocks like PR, which has a $9.677 billion market cap. The “small-cap premium” could amplify returns if PR’s fundamentals outperform expectations.

Risks to Consider

• Oil price volatility: PR’s exposure to crude prices is stark—oil dipped to $56/barrel in early 2025, levels not seen since 2021. With only 25% of 2025 production hedged, further declines could strain margins.
• Geographic concentration: Over 70% of PR’s assets are in New Mexico’s Permian Basin, making it vulnerable to regulatory changes or environmental opposition.
• Debt load: $4 billion in debt, while manageable with current cash flows, could limit flexibility if oil prices stay depressed.

Analyst Outlook

Zacks Investment Research assigns a “Hold” rating, citing PR’s strong earnings track record (it beat estimates by 10.1% in four straight quarters) but cautioning about geographic risks and valuation multiples. While the stock’s 43.9% upside potential is enticing, its 3.75x EV/EBITDA ratio lags peers like Range Resources (RRC), which trades at 9.27x—a reminder that energy valuations remain sector-wide depressed.

Conclusion: A Buy for Patient Energy Bulls

PR’s fundamentals—production growth, cost discipline, and institutional support—make it a compelling value play in 2025. Its 8% annual production target for 2025, supported by a $1.4 billion free cash flow, positions it to weather volatility better than many peers. However, investors must weigh its risks: oil price sensitivity, regulatory hurdles, and a $4 billion debt burden.

For those willing to bet on a rebound in energy demand or stabilization of crude prices, PR offers a 4.3% dividend yield and a forward P/E of 9.45—far below the sector average. But as Zacks notes, the stock’s 3.75x EV/EBITDA already prices in some of this optimism. The key question remains: Will oil prices rebound to $70+/barrel by year-end, or will geopolitical factors keep them suppressed?

In a market obsessed with AI’s short-term gains, PR reminds us that old-school energy still has its place—for those with the patience to wait out the storm.

Data as of May 2025. Past performance does not guarantee future results.