With SandRidge Energy (NYSE: SD) planning to raise nearly $721 million through a royalty offering, investors' expectations are running high on the stock. As a result of the news, shares gained as much as 12% in intraday trading Thursday.

Earnings down, debts up
Oklahoma-based SandRidge has been showing encouraging results of late, though its bottom line is still in the red. Revenues have gone up. Losses have been reduced. But that does not prove a thing -- yet. Income from operations, before adjusting for noncash expenses (i.e., EBITDA) saw a dismal drop in the last 12 months. EBITDA margins were at their lowest in the last five years -- a dismal 8%.

From a balance sheet perspective, the company is heavily in debt, which is definitely a matter of concern. A debt-to-equity ratio of 256.8% is undoubtedly huge. Compare that with peers such as Cabot Oil & Gas (NYSE: COG) at 55.9%, Ultra Petroleum (NYSE: UPL) at 135.9%, and QEP Resources (NYSE: QEP) at 51.7%. This makes the drop in earnings all the more worrisome for the Foolish investor.

How pricey is this stock?
Relatively speaking, the stock isn't pushing the discount that it needs to in order to account for the lousy financials we're seeing underneath. SandRidge's TEV/EBITDA currently stands at 22.9 times. This is expensive when compared to the likes of Cabot at 12.2, Ultra at 8.8, and QEP Resources at 7.1.

Foolish bottom line
While a royalty offering like the one the company has just announced will definitely put some much needed cash in the company's coffers, we're still looking at a company that is not functioning at a high level operationally. In the long run, SandRidge has to prove its worth by generating solid profits from operations. Until then, Fools should wait before making any move.

Fool contributor Isac Simon does not own shares of any of the companies mentioned in this article. The Motley Fool owns shares of Ultra Petroleum. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.