EOG Resources Inc (EOG, Financial) experienced a daily loss of -3.93% and a 3-month gain of 4.9% with an Earnings Per Share (EPS) (EPS) of 14.84. The question we aim to answer is: Is this stock fairly valued? In this article, we delve into a comprehensive analysis of EOG Resources' valuation, financial strength, profitability, and growth. We encourage you to read on for a detailed understanding of the company's financial health and market performance.
Introduction to EOG Resources Inc (EOG, Financial)
EOG Resources is an oil and gas producer with acreage in several U.S. shale plays, including the Permian Basin, the Eagle Ford, and the Bakken. As of the end of 2022, it reported net proved reserves of 4.2 billion barrels of oil equivalent. Net production averaged 908 thousand barrels of oil equivalent per day in 2022 at a ratio of 73% oil and natural gas liquids and 27% natural gas. The current stock price is $119.36, and the GF Value, an estimation of fair value, stands at $115.82. This comparison paves the way for a profound exploration of the company's value, integrating financial assessment with essential company details.
Understanding GF Value
The GF Value represents the current intrinsic value of a stock derived from our proprietary method. The GF Value Line on our summary page provides an overview of the fair value that the stock should ideally be traded at. This value is calculated based on historical multiples, a GuruFocus adjustment factor based on the company's past returns and growth, and future estimates of business performance.
If the stock price is significantly above the GF Value Line, it indicates overvaluation and likely poor future returns. Conversely, if it is significantly below the GF Value Line, the stock may be undervalued and likely to yield higher future returns. The stock of EOG Resources (EOG, Financial) is estimated to be fairly valued, indicating that its long-term return is likely to be close to the rate of its business growth.
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Financial Strength of EOG Resources
Investing in companies with poor financial strength carries a higher risk of permanent capital loss. Therefore, it is crucial to carefully review a company's financial strength before purchasing its stock. A great starting point for understanding a company's financial strength is looking at the cash-to-debt ratio and interest coverage. EOG Resources boasts a cash-to-debt ratio of 1.15, better than 61.01% of 1026 companies in the Oil & Gas industry. GuruFocus ranks EOG Resources' overall financial strength as 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 less risky. A company with high profit margins, such as EOG Resources, is usually a safer investment than those with low profit margins. EOG Resources has been profitable 7 over the past 10 years. Over the past twelve months, the company had a revenue of $25.10 billion and Earnings Per Share (EPS) of $14.84. Its operating margin is 42.42%, which ranks better than 85.5% of 979 companies in the Oil & Gas industry. Overall, the profitability of EOG Resources is ranked 8 out of 10, indicating strong profitability.
Growth is probably the most crucial factor in a company's valuation. A faster-growing company creates more value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth of EOG Resources is 19.9%, ranking better than 70% of 860 companies in the Oil & Gas industry. The 3-year average EBITDA growth rate is 21.7%, ranking better than 59.56% of 826 companies in the Oil & Gas industry.
ROIC vs WACC
Another method of determining a company's profitability is to compare its return on invested capital (ROIC) to the weighted average cost of capital (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. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, EOG Resources's return on invested capital is 25.6, and its cost of capital is 10.59.
Conclusion
In summary, EOG Resources (EOG, Financial) is estimated to be fairly valued. The company's financial condition is strong and its profitability is strong. Its growth ranks better than 59.56% of 826 companies in the Oil & Gas industry. To learn more about EOG Resources stock, you can check out its 30-Year Financials here.
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