We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Oil Still Above $85, EOG Up 41% in a Year: Is the Stock Still a Buy?
Read MoreHide Full Article
Key Takeaways
EOG gained 40.8% in a year, beating peers and the industry.
High oil prices, low debt and steady dividends support EOG.
EOG trades at 5.27x EV/EBITDA, below the industry's 8.51x.
EOG Resources Inc. (EOG - Free Report) has jumped 40.8% over the past year, outpacing the 20.9% growth of the industry’s composite stocks, and 40.4% and 37.1% improvements of its peers Exxon Mobil Corporation (XOM - Free Report) and Chevron Corporation (CVX - Free Report) , respectively.
Image Source: Zacks Investment Research
The outperformance might reflect strong market confidence in EOG’s prospects, especially when the pricing scenario of oil is extremely favorable. However, for investment conclusions, one should have a thorough assessment of the company’s fundamentals, growth potential and prevailing market conditions.
Oil Price is Still High: Boon for EOG’s Upstream Business
West Texas Intermediate (WTI) crude is trading at more than $85 per barrel, according to data from oilprice.com, owing to the persisting tensions in the Middle East. With EOG generating a significant proportion of revenues from crude oil and condensate, the high price of the commodity is extremely favorable for the leading oil and gas exploration and production company, like other energy giants, such as XOM and CVX.
The prolific multi-basin portfolio of EOG Resources comprises as much as 12 billion barrels of oil equivalent resources. With oil prices likely to remain high, per the U.S. Energy Information Administration, the company, with its diversified set of oil & gas assets, is expected to continue generating handsome cash flows for its shareholders.
EOG is also well-positioned to gain on the rising demand for natural gas from increasing exports of LNG and massive consumption of electricity by AI data centers.
The company has a low exposure to debt capital and hence can rely on its balance sheet to sail through all the business cycles efficiently. Compared to composite stocks in the industry, EOG has lower debt exposure, reflected in debt to capitalization of 19.31% compared with the industry’s 23.54%.
Image Source: Zacks Investment Research
To highlight the upstream player’s strong commitment to return shareholders’ capital, the company has never suspended or lowered dividend payments. In fact, EOG has been paying dividends for 28 years and plans to reward investors with $2.3 billion of regular dividend payments next year.
Should Investors Bet on the Stock?
Coming to the valuation story, EOG is currently considered cheap on a relative basis, with the stock trading at a 5.27x trailing 12-month Enterprise Value to Earnings Before Interest, Taxes, Depreciation and Amortization (EV/EBITDA), which is a discount compared with the broader industry average of 8.51x. EOG also appears cheaper compared to integrated giants such as XOM and CVX, which are currently trading at 7.87x and 6.80x trailing 12-month EV/EBITDA, respectively.
Image Source: Zacks Investment Research
Despite its strong share-price performance, EOG continues to trade at a discount to its industry peers, suggesting further upside potential. Its favorable fundamentals and attractive valuation make it worth considering.
View the Zacks #1 Rank List
Image: Bigstock
Oil Still Above $85, EOG Up 41% in a Year: Is the Stock Still a Buy?
Key Takeaways
EOG Resources Inc. (EOG - Free Report) has jumped 40.8% over the past year, outpacing the 20.9% growth of the industry’s composite stocks, and 40.4% and 37.1% improvements of its peers Exxon Mobil Corporation (XOM - Free Report) and Chevron Corporation (CVX - Free Report) , respectively.
The outperformance might reflect strong market confidence in EOG’s prospects, especially when the pricing scenario of oil is extremely favorable. However, for investment conclusions, one should have a thorough assessment of the company’s fundamentals, growth potential and prevailing market conditions.
Oil Price is Still High: Boon for EOG’s Upstream Business
West Texas Intermediate (WTI) crude is trading at more than $85 per barrel, according to data from oilprice.com, owing to the persisting tensions in the Middle East. With EOG generating a significant proportion of revenues from crude oil and condensate, the high price of the commodity is extremely favorable for the leading oil and gas exploration and production company, like other energy giants, such as XOM and CVX.
The prolific multi-basin portfolio of EOG Resources comprises as much as 12 billion barrels of oil equivalent resources. With oil prices likely to remain high, per the U.S. Energy Information Administration, the company, with its diversified set of oil & gas assets, is expected to continue generating handsome cash flows for its shareholders.
EOG is also well-positioned to gain on the rising demand for natural gas from increasing exports of LNG and massive consumption of electricity by AI data centers.
EOG’s Solid Balance Sheet & Strong Dividend Commitments
The company has a low exposure to debt capital and hence can rely on its balance sheet to sail through all the business cycles efficiently. Compared to composite stocks in the industry, EOG has lower debt exposure, reflected in debt to capitalization of 19.31% compared with the industry’s 23.54%.
To highlight the upstream player’s strong commitment to return shareholders’ capital, the company has never suspended or lowered dividend payments. In fact, EOG has been paying dividends for 28 years and plans to reward investors with $2.3 billion of regular dividend payments next year.
Should Investors Bet on the Stock?
Coming to the valuation story, EOG is currently considered cheap on a relative basis, with the stock trading at a 5.27x trailing 12-month Enterprise Value to Earnings Before Interest, Taxes, Depreciation and Amortization (EV/EBITDA), which is a discount compared with the broader industry average of 8.51x. EOG also appears cheaper compared to integrated giants such as XOM and CVX, which are currently trading at 7.87x and 6.80x trailing 12-month EV/EBITDA, respectively.
Despite its strong share-price performance, EOG continues to trade at a discount to its industry peers, suggesting further upside potential. Its favorable fundamentals and attractive valuation make it worth considering.
EOG currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.