EOG Resources Inc (EOG, Financial) experienced a daily gain of 1.93% and a 3-month gain of 14.04%. The company's Earnings Per Share (EPS) currently stands at 14.84. This article aims to answer the crucial question: Is EOG Resources (EOG) fairly valued? Let's delve into the company's valuation analysis to uncover its intrinsic worth.
Introduction to EOG Resources
EOG Resources is an oil and gas producer with significant acreage in several U.S. shale plays, including the Permian Basin, the Eagle Ford, and the Bakken. As of the end of 2022, the company reported net proved reserves of 4.2 billion barrels of oil equivalent. Its net production averaged 908 thousand barrels of oil equivalent per day in 2022, with a ratio of 73% oil and natural gas liquids to 27% natural gas. The company's market cap stands at $72.80 billion, with sales reaching $25.10 billion.
Understanding the GF Value of EOG Resources
The GF Value is a unique intrinsic value of a stock derived from a proprietary method. The GF Value Line provides an overview of the fair value at which the stock should ideally be traded. It is calculated based on historical multiples, GuruFocus adjustment factor based on the company's past returns and growth, and future estimates of business performance.
According to our valuation method, EOG Resources (EOG, Financial) is considered fairly valued. The current stock price of $124.99 per share aligns with the GF Value, indicating that the long-term return of its stock is likely to be close to the rate of its business growth.
Financial Strength of EOG Resources
Investing in companies with weak financial strength can lead to a higher risk of permanent capital loss. Therefore, a careful review of a company's financial strength is essential before deciding to purchase its stock. EOG Resources has a cash-to-debt ratio of 1.15, ranking better than 60.74% of 1034 companies in the Oil & Gas industry. The overall financial strength of EOG Resources is ranked 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 generally less risky. EOG Resources has been profitable 7 out of the past 10 years. The company's operating margin is 42.42%, ranking better than 85.06% of 984 companies in the Oil & Gas industry. This strong profitability is reflected in the company's profitability rank of 8 out of 10.
Growth is a crucial factor in the valuation of a company. EOG Resources' 3-year average annual revenue growth is 19.9%, ranking better than 70.19% of 862 companies in the Oil & Gas industry. The 3-year average EBITDA growth rate is 21.7%, which ranks better than 59.71% of 829 companies in the same industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can provide valuable insights into its profitability. EOG Resources' ROIC of 25.6 exceeds its WACC of 10.37, suggesting the company is creating value for its shareholders.
Conclusion
Overall, the stock of EOG Resources (EOG, Financial) is believed to be fairly valued. The company's strong financial condition, high profitability, and above-average growth make it an attractive investment in the Oil & Gas industry. For more information about EOG Resources stock, you can check out its 30-Year Financials here.
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