EQT Corp (EQT, Financial) has seen a daily gain of 2.95%, and a 3-month gain of 24.78%. With an Earnings Per Share (EPS) (EPS) of 8.89, it's worth exploring whether the stock is significantly overvalued. This article provides a comprehensive valuation analysis of EQT Corp, and encourages readers to delve into the subsequent sections for a deeper understanding.
Company Overview
EQT Corp is an independent natural gas production company, primarily operating in the Marcellus and Utica shales in the Appalachian Basin, Eastern United States. The company focuses on executing combo-development projects for developing multiwell pads to meet supply needs, with an emphasis on maximizing operational efficiency, technology, and sustainability. Its main customers include marketers, utilities, and industrial operators in the Appalachian Basin.
The company's current stock price is $43.22, with a market cap of $15.60 billion. However, the GF Value, an estimation of the fair value, is $29.56. This discrepancy sets the stage for a more profound exploration of the company's value.
Understanding GF Value
The GF Value is a proprietary measure of a stock's intrinsic value, calculated based on historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line denotes the stock's ideal fair trading value.
The stock of EQT (EQT, Financial) appears to be significantly overvalued, according to GuruFocus Value calculation. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
Given that EQT is significantly overvalued, the long-term return of its stock is likely to be much lower than its future business growth.
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Financial Strength
Investing in companies with poor financial strength carries a higher risk of permanent loss of capital. Therefore, it's crucial to carefully review the financial strength of a company before deciding to buy its stock. EQT has a cash-to-debt ratio of 0.26, which is worse than 64.46% of companies in the Oil & Gas industry. Overall, the financial strength of EQT is ranked 6 out of 10, indicating fair financial health.
Profitability and Growth
Companies that have been consistently profitable over the long term offer less risk for investors. EQT has been profitable 5 over the past 10 years. Over the past twelve months, the company had a revenue of $9 billion and Earnings Per Share (EPS) of $8.89. Its operating margin is 52.69%, which ranks better than 91.34% of companies in the Oil & Gas industry. Overall, the profitability of EQT is ranked 7 out of 10, indicating fair profitability.
One of the most important factors in the valuation of a company is growth. The average annual revenue growth of EQT is 26.1%, which ranks better than 79.3% of companies in the Oil & Gas industry. The 3-year average EBITDA growth is 137.6%, which ranks better than 97.46% of companies in the Oil & Gas industry.
ROIC vs WACC
One can also evaluate a company's profitability by comparing its return on invested capital (ROIC) to its weighted average cost of capital (WACC). Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. During the past 12 months, EQT's ROIC was 16.78 while its WACC came in at 7.3.
Conclusion
In conclusion, the stock of EQT (EQT, Financial) appears to be significantly overvalued. The company's financial condition is fair, and its profitability is fair. Its growth ranks better than 97.46% of companies in the Oil & Gas industry. To learn more about EQT stock, you can check out its 30-Year Financials here.
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