Unveiling Vital Energy (VTLE)'s Value: Is It Really Priced Right? A Comprehensive Guide
The stock performance of Vital Energy (NYSE:VTLE) has been a point of interest for many investors. With a daily change of -6.7% and a 3-month gain of 32.58%, the company's stock performance is noteworthy. Coupled with an Earnings Per Share (EPS) of 50.4, it begs the question: is Vital Energy (NYSE:VTLE) fairly valued? This article aims to provide an in-depth analysis of the company's valuation, encouraging readers to delve into the following comprehensive assessment.
A Snapshot of Vital Energy
Vital Energy is an independent energy company, primarily focused on the acquisition, exploration, and development of oil and natural gas properties in the Permian Basin of West Texas. The company's stock price currently stands at $55, with the GF Value estimating a fair value of $49.92. This comparison sets the stage for a deeper exploration of Vital Energy's valuation, integrating financial assessment with essential company details.
Understanding the GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated based on historical multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line offers an overview of the fair value that the stock should be traded at. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
Vital Energy's stock is considered fairly valued based on GuruFocus' valuation method. Given this, the long-term return of its stock is likely to be close to the rate of its business growth.
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Assessing Vital Energy's Financial Strength
Investing in companies with poor financial strength carries a higher risk of permanent loss of capital. Therefore, a careful review of a company's financial strength is crucial before deciding to buy its stock. Vital Energy has a cash-to-debt ratio of 0.04, which is worse than 87.65% of 1028 companies in the Oil & Gas industry. The overall financial strength of Vital Energy is ranked at 4 out of 10 by GuruFocus, indicating that its financial strength is poor.
Profitability and Growth of Vital Energy
Investing in profitable companies carries less risk, especially if the company has demonstrated consistent profitability over the long term. Vital Energy has been profitable for 6 years over the past 10 years. Its operating margin of 45.24% is better than 86.55% of 974 companies in the Oil & Gas industry. GuruFocus ranks Vital Energy's profitability as fair.
Growth is a crucial factor in the valuation of a company. The 3-year average annual revenue growth rate of Vital Energy is 16.3%, which ranks better than 61.96% of 857 companies in the Oil & Gas industry. However, its 3-year average EBITDA growth rate is 0%, ranking worse than 0% of 824 companies in the Oil & Gas industry.
ROIC vs WACC: A Measure of Profitability
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can provide valuable insights into its profitability. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business, while WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC exceeds the WACC, the company is likely creating value for its shareholders. Vital Energy's ROIC is 29.14 while its WACC is 11.97.
Conclusion
In conclusion, the stock of Vital Energy (NYSE:VTLE) is believed to be fairly valued. The company's financial condition is poor, its profitability is fair, and its growth ranks worse than 0% of 824 companies in the Oil & Gas industry. To learn more about Vital Energy stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
