Equinor ASA (EQNR, Financial) experienced a daily gain of 4.6%, and a 3-month gain of 14.78%. With an Earnings Per Share (EPS) (EPS) of 7.67, the question arises, is the stock modestly undervalued? This comprehensive analysis aims to answer this question and provide a detailed understanding of Equinor ASA's valuation.
Company Introduction
Equinor ASA is a Norway-based integrated oil and gas company, operating primarily on the Norwegian Continental Shelf. It produced 2.0 million barrels of oil equivalent per day in 2022 and ended the year with 5.2 billion barrels of proven reserves. The company's operations also include offshore wind, solar, oil refineries, and natural gas processing, marketing, and trading. With a current stock price of $32.96 and a market cap of $96.20 billion, Equinor ASA's intrinsic value or GF Value stands at $39.32, indicating that the stock might be modestly undervalued.
Understanding GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is derived from historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line provides an overview of the fair value that the stock should 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. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
Equinor ASA (EQNR, Financial) stock shows every sign of being modestly undervalued based on the GF Value calculation. At its current price of $32.96 per share, Equinor ASA has a market cap of $96.20 billion and the stock shows every sign of being modestly undervalued. As Equinor ASA is relatively undervalued, the long-term return of its stock is likely to be higher than its business growth.
Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. Therefore, it's crucial to review a company's financial strength before deciding to buy shares. Equinor ASA has a cash-to-debt ratio of 1.39, which ranks better than 63.65% of 1029 companies in the Oil & Gas industry. Based on this, GuruFocus ranks Equinor ASA's financial strength as 7 out of 10, suggesting a fair balance sheet.
Profitability and Growth
Companies that have been consistently profitable over the long term offer less risk for investors. Equinor ASA has been profitable 7 over the past 10 years. Over the past twelve months, the company had a revenue of $128.60 billion and Earnings Per Share (EPS) of $7.67. Its operating margin is 47.48%, which ranks better than 89.71% of 982 companies in the Oil & Gas industry. Overall, the profitability of Equinor ASA is ranked 8 out of 10, which indicates strong profitability.
Growth is a critical factor in the valuation of a company. The 3-year average annual revenue growth of Equinor ASA is 39.5%, which ranks better than 89.16% of 858 companies in the Oil & Gas industry. The 3-year average EBITDA growth rate is 61.3%, which ranks better than 87.96% of 822 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. For the past 12 months, Equinor ASA's return on invested capital is 26.68, and its cost of capital is 8.2.
Conclusion
In summary, the stock of Equinor ASA (EQNR, Financial) shows every sign of being modestly undervalued. The company's financial condition is fair, and its profitability is strong. Its growth ranks better than 87.96% of 822 companies in the Oil & Gas industry. To learn more about Equinor ASA stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
