EOG Resources Inc (EOG, Financial) experienced a daily loss of -0.57%, but has shown a 3-month gain of 15.82%. With an Earnings Per Share (EPS) of 14.84, this raises the question: is the stock fairly valued? This article aims to provide an in-depth analysis of EOG Resources' valuation, starting with an overview of the company and its operations, followed by an examination of its GF Value and financial strength. We encourage readers to follow along for a comprehensive understanding of EOG Resources' intrinsic value.
A Snapshot of EOG Resources Inc (EOG, Financial)
EOG Resources is a prominent oil and gas producer with considerable acreage in several U.S. shale plays, including the Permian Basin, the Eagle Ford, and the Bakken. As of the end of 2022, it reported net proved reserves of 4.2 billion barrels of oil equivalent. Its net production averaged 90 thousand barrels of oil equivalent per day in 2021, with a ratio of 73% oil and natural gas liquids and 27% natural gas. With a current stock price of $126.69 per share and a market cap of $73.80 billion, the GF Value estimates EOG Resources to be fairly valued.
Understanding the GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated based on historical trading multiples, a GuruFocus adjustment factor based on past returns and growth, and future business performance estimates. The GF Value Line provides a representation of the stock's ideal fair trading value. If the stock price 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.
According to the GuruFocus Value calculation, EOG Resources (EOG, Financial) appears to be fairly valued. This is based on the historical multiples that the stock has traded at, the company's past business growth, and analyst estimates of future business performance. As EOG Resources 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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Assessing EOG Resources' Financial Strength
Before investing in a company, it's crucial to evaluate its financial strength. Companies with poor financial strength pose a higher risk of permanent loss. The cash-to-debt ratio and interest coverage can provide insights into a company's financial strength. EOG Resources has a cash-to-debt ratio of 1.15, which is better than 60.37% of 1022 companies in the Oil & Gas industry. The overall financial strength of EOG Resources is 8 out of 10, indicating strong financial health.
Profitability and Growth of EOG Resources
Investing in profitable companies, especially those with consistent profitability over the long term, is less risky. EOG Resources has been profitable 7 out of the past 10 years. Over the past twelve months, the company had a revenue of $25.10 billion and Earnings Per Share (EPS) of $14.84. Its operating margin is 42.42%, which ranks better than 84% of 969 companies in the Oil & Gas industry. Overall, the profitability of EOG Resources is ranked 8 out of 10, indicating strong profitability.
Growth is a vital factor in the valuation of a company. EOG Resources' 3-year average revenue growth rate is better than 70.22% of 853 companies in the Oil & Gas industry. EOG Resources's 3-year average EBITDA growth rate is 21.7%, which ranks better than 59.73% of 827 companies in the Oil & Gas industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted cost of capital (WACC) can provide insights into its profitability. 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. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, EOG Resources's ROIC was 25.6, while its WACC came in at 9.61.
Conclusion
In conclusion, the stock of EOG Resources (EOG, Financial) appears to be fairly valued. The company's financial condition is strong and its profitability is robust. Its growth ranks better than 59.73% of 827 companies in the Oil & Gas industry. To learn more about EOG Resources stock, you can check out its 30-Year Financials here.
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