On August 25, 2023, Devon Energy Corp (DVN, Financial) experienced a daily gain of 3.26%, contributing to a 3-month gain of 6.79%. With an Earnings Per Share (EPS) (EPS) of 7.31, the question arises: Is the stock fairly valued? This article aims to provide an in-depth analysis of Devon Energy's valuation, encouraging readers to delve into the subsequent detailed examination.
A Snapshot of Devon Energy Corp (DVN, Financial)
Devon Energy, based in Oklahoma City, is one of the largest independent exploration and production companies in North America. The firm's asset base is spread throughout onshore North America and includes exposure to the Delaware, STACK, Eagle Ford, Powder River Basin, and Bakken plays. As of year-end 2022, Devon's proved reserves totaled 1.8 billion barrels of oil equivalent, and net production that year was 611 thousand boe/d. The company's current stock price stands at $50.43 per share, with a market capitalization of $32.30 billion. The GF Value, which estimates the fair value of the stock, is $54.27.
Understanding the GF Value of Devon Energy
The GF Value is a proprietary measure that determines the intrinsic value of a stock. The GF Value Line on our summary page provides an overview of the fair value at which the stock should ideally be traded. This value is computed based on historical trading multiples, a GuruFocus adjustment factor based on the company's past performance and growth, and future estimates of business performance.
According to GuruFocus Value calculation, Devon Energy appears to be fairly valued. This conclusion is based on historical multiples, past business growth, and analyst estimates of future business performance. With a current price of $50.43 per share and a market cap of $32.30 billion, Devon Energy's stock aligns with our estimation of its fair value.
Because Devon Energy is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth.
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Financial Strength of Devon Energy
Assessing a company's financial strength is crucial to avoid the risk of permanent capital loss. Both the cash-to-debt ratio and interest coverage offer insight into a company's financial strength. Devon Energy's cash-to-debt ratio of 0.07 ranks worse than 83.35% of 1021 companies in the Oil & Gas industry, indicating fair financial strength.
Profitability and Growth of Devon Energy
A company's profitability over the long term is a key factor in reducing investment risk. Devon Energy has been profitable 5 over the past 10 years, with a revenue of $17 billion and an EPS of $7.31 over the past twelve months. Its operating margin of 37.06% ranks better than 79.34% of 968 companies in the Oil & Gas industry, indicating fair profitability.
The growth of a company is closely correlated with its long-term stock performance. Devon Energy's 3-year average annual revenue growth of 23.7% ranks better than 76.32% of 853 companies in the Oil & Gas industry.
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can also evaluate its profitability. Devon Energy's ROIC of 24.3 exceeds its WACC of 11.27, indicating the company is likely creating value for its shareholders.
Conclusion
In conclusion, the stock of Devon Energy (DVN, Financial) gives every indication of being fairly valued. The company's financial condition is fair, and its profitability is fair. Its growth ranks better than 86.44% of 826 companies in the Oil & Gas industry. To learn more about Devon Energy stock, you can check out its 30-Year Financials here.
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