TXO

We rate TXO Partners, L.P. (TXO) as Avoid with a composite score of 39.2/100 at a current price of $12.70. The stock falls in the bottom quintile of our universe across key quantitative factors, and the multi-factor weakness suggests a high probability of continued underperformance.

The rating is primarily driven by strength in stability (81th percentile) and quality (45th percentile), which together account for the majority of the composite score. Offsetting weakness in momentum (7th percentile) and investment (23th percentile) tempers our overall conviction. We assign a No Moat rating (34/100), Low uncertainty, and Standard capital allocation.

Key items to watch: momentum to confirm whether the current price trend has legs; sustainability of the current growth rate. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

TXO Partners, L.P. holds a top-quartile position (#0 of 50) within the Mining sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 39.2/100 places it at rank #3646 in our full 7,333-stock universe. At $784M in market capitalization, TXO Partners, L.P. is a small-cap player in the Mining space, which limits certain scale advantages but may allow for more agile strategic execution.

Revenue is growing at 76%, though momentum at the 7th percentile suggests the market has not yet fully recognized this trajectory. This potential disconnect between fundamental improvement and market recognition could represent an opportunity for patient investors if the growth trend persists.

The margin cascade tells an important story: gross margins of 100% (+56.8pp vs sector) narrow to operating margins of -3% (-15.2pp vs sector) and net margins of 1.8%, yielding a gross-to-net conversion rate of 2%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

At a current price of $12.70, TXO Partners, L.P. is trading at a premium to fundamental value. Our value factor score of 37/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The premium valuation implies the market is pricing in significant future growth or quality improvements that are not yet fully reflected in current fundamentals.

The stock currently trades at a P/E of 101.2x (a 637% premium to the sector median of 13.7x), EV/EBITDA of 64.0x (at a premium), P/B of 0.9x, P/S of 2.0x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis finds only partially justified by current fundamentals.

We assign a Low uncertainty rating to TXO Partners, L.P.. The company exhibits strong financial stability with a beta of 0.44, conservative leverage (37% D/E), and a stability factor in the 81th percentile. The predictable nature of the business model and solid financial position reduce the range of potential outcomes, giving us confidence in our fair value estimate.

Specific risk factors that inform our assessment include: low beta of 0.44 — while defensive, this may indicate limited upside participation in bull markets; elevated valuation multiple (P/E 101.2x) that leaves limited margin for error. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 81th percentile and quality factor at the 45th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 100% provide a buffer against cost pressures; above-average stability (81th percentile) suggests predictable business dynamics; a 16.01% dividend yield anchors total return. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate TXO Partners, L.P.'s capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 0.9%, and the balance sheet is managed within acceptable parameters (D/E: 37%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; TXO Partners, L.P. falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. The 16.01% dividend yield provides some income return, but the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, TXO Partners, L.P. receives a Avoid rating with a composite score of 39.2/100 (rank #3646 of 7,333). Our quantitative framework assigns a No Moat (34/100, trend: stable), Low uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 38/100.

Our analysis does not support a constructive view on TXO Partners, L.P. at this time. The combination of limited competitive advantages, low uncertainty, and standard capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.