With a daily gain of 3.76% and a 3-month gain of 34.67%, PBF Energy Inc (PBF, Financial) is making notable strides in the market. The company boasts an Earnings Per Share (EPS) of 24. However, the question remains: Is the stock significantly overvalued? This article aims to provide an in-depth valuation analysis of PBF Energy, encouraging readers to delve deeper into the company's financials.
A Snapshot of PBF Energy
PBF Energy Inc is an independent petroleum refiner and supplier of unbranded transportation fuels, heating oil, petrochemical feedstocks, lubricants, and other petroleum products in the United States. The company owns refineries in Delaware, Ohio, New Jersey, California, and Louisiana. With a current stock price of $54.89 per share, PBF Energy has a market cap of $6.80 billion. But how does this compare to its fair value?
Understanding the GF Value
The GF Value is a proprietary measure that calculates the intrinsic value of a stock. This value is derived from historical multiples, a GuruFocus adjustment factor based on the company's past performance and growth, and future business performance estimates.
The GF Value Line on our summary page provides an overview of the fair value that the stock should ideally be traded at. 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.
Is PBF Energy Overvalued?
Based on the GF Value, PBF Energy appears to be significantly overvalued. The GF Value estimates the stock's fair value based on historical multiples, an internal adjustment based on the company's past business growth, and analyst estimates of future business performance. As a result, if the stock's share price is significantly above the GF Value Line, the stock may be overvalued, and future returns may be poor.
Given that PBF Energy 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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PBF Energy's 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 a company's financial strength before deciding whether to buy its stock. Looking at the cash-to-debt ratio and interest coverage is a great starting point for understanding a company's financial strength. PBF Energy has a cash-to-debt ratio of 0.68, which ranks better than 54.7% of companies in the Oil & Gas industry. GuruFocus ranks PBF Energy's overall financial strength at 8 out of 10, indicating strong financial health.
Profitability and Growth of PBF Energy
Companies with consistent profitability over the long term are typically less risky investments. PBF Energy has been profitable 8 out of the past 10 years. Over the past twelve months, the company had a revenue of $42.10 billion and an Earnings Per Share (EPS) of $24. Its operating margin is 7.6%, which ranks worse than 52.34% of 984 companies in the Oil & Gas industry. Overall, PBF Energy's profitability is ranked 7 out of 10, indicating fair profitability.
One of the most important factors in a company's valuation is its growth. Companies that grow faster create more value for shareholders, especially if that growth is profitable. PBF Energy's average annual revenue growth is 22.4%, which ranks better than 74.56% of 861 companies in the Oil & Gas industry. The 3-year average EBITDA growth is 56.5%, which ranks better than 86.39% of 830 companies in the Oil & Gas industry.
ROIC vs 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 exceeds the WACC, the company is likely creating value for its shareholders. During the past 12 months, PBF Energy's ROIC was 31.57 while its WACC came in at 8.86.
Conclusion
In conclusion, PBF Energy's stock appears to be significantly overvalued. The company's financial condition is strong, and its profitability is fair. Its growth ranks better than 86.39% of 830 companies in the Oil & Gas industry. To learn more about PBF Energy stock, you can check out its 30-Year Financials here.
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