Pioneer Natural Resources Co (PXD, Financial) experienced a daily gain of 9.12% and a three-month gain of 16.97%. Despite its impressive performance, the question arises: is the stock modestly overvalued? The company's Earnings Per Share (EPS) stand at 23.46, which adds another layer to the valuation analysis. This article aims to provide a comprehensive evaluation of Pioneer Natural Resources Co's intrinsic value, financial strength, profitability, and growth. We invite you to delve into the following analysis for a better understanding of the company's valuation.
Company Introduction
Headquartered in Irving, Texas, Pioneer Natural Resources Co is an independent oil and gas exploration and production company focusing on the Permian Basin in Texas. As of the end of 2022, the company's proven reserves were 2.4 billion barrels of oil equivalent, with a net production for the year of 650 million barrels of oil equivalent per day. Oil and natural gas liquids represented 79% of production. The company's current stock price is $234.57, while its GF Value, a measure of fair value, stands at $199.04.
Understanding GF Value
The GF Value is a proprietary measure that represents the intrinsic value of a stock. It is calculated based on historical multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line on our summary page gives an overview of the fair value at which the stock should ideally be traded. If the stock price is significantly above the GF Value Line, the stock is considered overvalued and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, the stock is undervalued and its future return will likely be higher.
Based on GuruFocus' valuation method, Pioneer Natural Resources Co's stock is believed to be modestly overvalued. Given this valuation, the long-term return of its stock is likely to be lower than its business growth.
Link: These companies may deliever higher future returns at reduced risk.
Financial Strength
It is crucial to assess the financial strength of a company before investing in its stock. Companies with poor financial strength pose a higher risk of permanent loss. The cash-to-debt ratio and interest coverage are great indicators of a company's financial strength. Pioneer Natural Resources Co has a cash-to-debt ratio of 0.04, which is worse than 87.85% of 1029 companies in the Oil & Gas industry. Despite this, the overall financial strength of Pioneer Natural Resources Co is 7 out of 10, indicating fair financial health.
Profitability and Growth
Companies that have been consistently profitable over the long term offer less risk for investors. Pioneer Natural Resources Co has been profitable 6 times over the past 10 years. Over the past twelve months, the company had a revenue of $20.40 billion and Earnings Per Share (EPS) of $23.46. Its operating margin is 37.37%, which ranks better than 81.04% of 981 companies in the Oil & Gas industry. Overall, the profitability of Pioneer Natural Resources Co is ranked 8 out of 10, indicating strong profitability.
One of the most important factors in the valuation of a company is growth. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of Pioneer Natural Resources Co is 18.7%, which ranks better than 66.9% of 858 companies in the Oil & Gas industry. The 3-year average EBITDA growth is 43.4%, which ranks better than 79.64% of 825 companies in the Oil & Gas industry.
A company's profitability can also be evaluated by comparing its return on invested capital (ROIC) to its weighted average cost of capital (WACC). If the ROIC exceeds the WACC, the company is likely creating value for its shareholders. During the past 12 months, Pioneer Natural Resources Co's ROIC is 18.02 while its WACC came in at 9.62.
Conclusion
In summary, the stock of Pioneer Natural Resources Co is believed to be modestly overvalued. The company's financial condition is fair and its profitability is strong. Its growth ranks better than 79.64% of 825 companies in the Oil & Gas industry. To learn more about Pioneer Natural Resources Co stock, you can check out its 30-Year Financials here.
To find out the high quality companies that may deliver above average returns, please check out GuruFocus High Quality Low Capex Screener.
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.
