YPF SA (YPF, Financial) reported a daily gain of 4.22% and a 3-month gain of 6.42%. Its Earnings Per Share (EPS) stands at 4.4. Despite these figures, the question remains: Is the stock significantly overvalued? Our valuation analysis aims to provide an answer. We invite you to delve into the following sections for a comprehensive understanding of YPF SA's intrinsic value.
About YPF SA
YPF SA is an integrated oil and gas company based in Argentina. The company operates across the domestic upstream, downstream, and gas and power segments. Its upstream operations comprise the exploration, development, and production of crude oil, natural gas, and LPG. The downstream operations include refining, marketing, transportation, and distribution of oil, petroleum products, derivatives, petrochemicals, LPG, and bio-fuels. The company generates maximum revenue from the downstream segment. The company's stock price stands at $13.64, while the GF Value, an estimation of fair value, is $7.5.
Understanding GF Value
The GF Value represents the current intrinsic value of a stock derived from our exclusive method. The GF Value Line on our summary page gives an overview of the fair value that the stock should be traded at. It is calculated based on three factors:
- Historical multiples (PE Ratio, PS Ratio, PB Ratio and Price-to-Free-Cash-Flow) that the stock has traded at.
- GuruFocus adjustment factor based on the company's past returns and growth.
- Future estimates of the business performance.
We believe the GF Value Line is the fair value that the stock should be traded at. The stock price will most likely fluctuate around the GF Value Line. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher.
According to GuruFocus' valuation method, YPF SA (YPF, Financial) appears to be significantly overvalued. The stock's fair value is estimated based on historical multiples, an internal adjustment based on the company's past business growth, and analyst estimates of future business performance. If the share price is significantly above the GF Value Line, the stock may be overvalued and have poor future returns. Conversely, if the share price is significantly below the GF Value calculation, the stock may be undervalued and have higher future returns. At its current price of $ 13.64 per share, YPF SA stock gives every indication of being significantly overvalued.
Because YPF SA 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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YPF SA's Financial Strength
Companies with poor financial strength expose investors to a high risk of permanent capital loss. To avoid this, investors must thoroughly research and review a company's financial strength before purchasing shares. Both the cash-to-debt ratio and interest coverage of a company are effective ways to understand its financial strength. YPF SA has a cash-to-debt ratio of 0.18, which ranks worse than 70.81% of 1021 companies in the Oil & Gas industry. The overall financial strength of YPF SA is 5 out of 10, indicating fair financial strength.
Profitability and Growth of YPF SA
Investing in profitable companies, especially those that have demonstrated consistent profitability over the long term, poses less risk. A company with high profit margins is typically a safer investment than one with low profit margins. YPF SA has been profitable 7 over the past 10 years. Over the past twelve months, the company had a revenue of $23.20 billion and Earnings Per Share (EPS) of $4.4. Its operating margin is 9.07%, which ranks better than 50.78% of 967 companies in the Oil & Gas industry. Overall, GuruFocus ranks the profitability of YPF SA at 7 out of 10, indicating fair profitability.
Growth is probably one of the most important factors in the valuation of a company. GuruFocus' research has found that growth is closely correlated with the long-term performance of a company's stock. If a company's business is growing, the company usually creates value for its shareholders, especially if the growth is profitable. Conversely, if a company's revenue and earnings are declining, the value of the company will decrease. YPF SA's 3-year average revenue growth rate is better than 95.53% of 850 companies in the Oil & Gas industry. YPF SA's 3-year average EBITDA growth rate is 79.3%, which ranks better than 93.05% of 820 companies in the Oil & Gas industry.
ROIC vs WACC
Another way to evaluate a company's profitability is to compare its return on invested capital (ROIC) to its weighted 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. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, YPF SA's ROIC was 6.83, while its WACC came in at 9.36.
Conclusion
In conclusion, the stock of YPF SA (YPF, Financial) gives every indication of being significantly overvalued. The company's financial condition is fair and its profitability is fair. Its growth ranks better than 93.05% of 820 companies in the Oil & Gas industry. To learn more about YPF SA stock, you can check out its 30-Year Financials here.
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