YPF SA (YPF, Financial) has recently experienced a notable daily gain of 6.55%, complemented by a three-month gain of 25.13%. With an Earnings Per Share (EPS) of 2.24, investors may question if the current stock price reflects the company's true value or if it is significantly overvalued. This article delves into the valuation of YPF SA (YPF) to determine whether its market price is justified by its intrinsic value.
Company Overview
YPF SA is an integrated oil and gas company based in Argentina, with a focus on the exploration, development, and production of crude oil, natural gas, and LPG. It also has a strong presence in the downstream sector, involving the refining, marketing, transportation, and distribution of oil and various petroleum products. The company's maximum revenue is generated from the downstream segment. With a current share price of $17.09 and a market cap of $6.70 billion, it is essential to compare this with the GF Value to gauge whether the stock is trading at a fair level.
Understanding GF Value
The GF Value is a unique measure that estimates the intrinsic value of a stock by considering historical trading multiples, company performance adjustments, and future business projections. If a stock's price significantly exceeds the GF Value Line, it may be overvalued, suggesting a potential decline in future returns. Conversely, a stock priced well below the GF Value Line could indicate a higher likelihood of favorable future returns.
YPF SA (YPF, Financial) appears to be significantly overvalued based on GuruFocus's valuation. The stock's current price of $17.09 per share, with a fair value (GF Value) of $6.52, suggests a substantial premium above its intrinsic value. This discrepancy indicates that YPF SA's stock may not align with the company's anticipated business growth, potentially leading to lower long-term returns for investors.
Financial Strength
Investors must consider a company's financial strength to mitigate the risk of capital loss. YPF SA's cash-to-debt ratio stands at 0.17, ranking below 71.59% of its peers in the Oil & Gas industry. The company's overall financial strength is rated as fair, with a score of 5 out of 10, suggesting a moderate risk profile for potential investors.
Profitability and Growth
Profitability is a critical metric for assessing investment risk. YPF SA has maintained profitability for seven of the past ten years, with a revenue of $21.90 billion and an operating margin of 5.32%, which is below average within the industry. The company's profitability is ranked 7 out of 10, indicating a fair performance.
Growth is a vital factor in valuing a company. YPF SA's 3-year average revenue growth rate surpasses 95.36% of companies in the Oil & Gas industry, and its EBITDA growth rate is in the top tier, ranking better than 92.84% of its peers. Such robust growth metrics are promising for the company's valuation.
ROIC vs. WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) is another way to evaluate profitability. YPF SA's ROIC of 3.61 is significantly lower than its WACC of 13.87, suggesting that the company is not generating sufficient returns on its investments, which can impact shareholder value.
Conclusion
YPF SA (YPF, Financial) is currently trading at a price that suggests it is significantly overvalued. While the company's financial condition and profitability are fair, its excellent growth performance stands out in the industry. Investors interested in YPF SA should consider these factors and review the company's 30-Year Financials for a more detailed analysis.
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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.
