APA Corp (APA, Financial) has recently shown a daily gain of 3.7%, yet over the past three months, it has experienced a loss of 8.63%. With an Earnings Per Share (EPS) of $4.88, investors may wonder if APA (APA) is fairly valued in the current market. This article delves into a valuation analysis to answer this question, providing readers with a clear understanding of APA's market value.
Company Introduction
Based in Houston, APA is a leading independent exploration and production company with operations across the U.S., Egypt, the North Sea, and Suriname. As of year-end 2022, APA boasted 890 million barrels of oil equivalent in proved reserves, and its net production reached 400 thousand barrels of oil equivalent per day. With a current stock price of $37.29 and a market cap of $11.40 billion, a comparison to the GF Value of $37.99 suggests that APA (APA, Financial) is trading close to its estimated fair value.
Summarize GF Value
The GF Value is a unique measure of APA's intrinsic value, reflecting historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. If APA's stock price significantly deviates from the GF Value Line, it may indicate overvaluation or undervaluation, affecting potential future returns. Currently, APA (APA, Financial) appears to be fairly valued, which suggests that its long-term return may closely align with its business growth rate.
Financial Strength
Considering financial strength is crucial as it can prevent capital loss. APA's financial strength is a concern, with a cash-to-debt ratio of 0.02, ranking lower than 94.09% of its peers in the Oil & Gas industry. This positions APA's financial strength at a 4 out of 10, indicating a poor balance sheet.
Profitability and Growth
APA has been profitable 5 years out of the last 10, with a notable operating margin of 42.49%, ranking above 88.59% of companies in the industry. This profitability score of 7 out of 10 highlights APA's solid performance. Moreover, APA's growth has been impressive, with a 3-year average annual revenue growth of 24.5%, outpacing 75.52% of its industry peers. The 3-year average EBITDA growth rate is an astonishing 402.8%, which is higher than 99.88% of companies in the Oil & Gas sector.
ROIC vs WACC
An analysis of Return on Invested Capital (ROIC) versus Weighted Average Cost of Capital (WACC) can shed light on APA's value creation. APA's ROIC of 18.47 is substantially higher than its WACC of 7.24, indicating that the company is generating value for its shareholders.
Conclusion
The analysis suggests that APA Corp (APA, Financial) is priced fairly in the market, considering its financial condition and profitability. Its growth prospects are particularly strong, outperforming a vast majority of its industry counterparts. For more in-depth information, APA's 30-Year Financials can provide additional insights.
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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.
