Does the Recent 14.8% Drop Present a Fresh Opportunity in EOG Resources?

• Ever wondered if EOG Resources is still a bargain, or if its best years are in the rearview mirror? Let’s kick off our dive into what the numbers and wider market are really saying about its current value.
• The share price has moved modestly recently, slipping by 0.8% over the past week and down just 0.5% for the past month. The longer-term chart reveals a 14.8% dip year-to-date and 17.4% over the last year, giving potential growth and risk perceptions more weight.
• Recently, industry updates on oil demand forecasts and U.S. supply have caused ripples across energy stocks. EOG’s performance has been in step with analyst attention on shale producers and fluctuations in crude prices, drawing eyes to the sector’s future outlook.
• On the numbers side, EOG Resources boasts a perfect 6/6 valuation score, meaning it looks undervalued across every standard check. In a moment, we’ll unpack the different valuation approaches used and hint at a more insightful way to frame “fair value” that goes beyond just the headline figures.

Find out why EOG Resources's -17.4% return over the last year is lagging behind its peers.

Approach 1: EOG Resources Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates what EOG Resources is worth today by projecting its future cash flows and discounting them back to their present value. This approach helps investors look beyond short-term market fluctuations by focusing on the business’s fundamental cash generation abilities over time.

Currently, EOG Resources reports a Free Cash Flow of $4.1 Billion. Analyst forecasts suggest steady growth, with projections reaching $6.1 Billion by 2029. Estimates beyond the first five years are extrapolated to capture the ongoing potential of EOG’s operations, using expert assumptions past that window. This extended view provides a fuller picture of long-term value instead of just short-term results.

Based on the 2 Stage Free Cash Flow to Equity DCF model, EOG Resources’ estimated intrinsic value is $292.57 per share. This analysis suggests the stock is trading at a 63.7% discount to its fair value, indicating it may be significantly undervalued based on current cash flow expectations.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests EOG Resources is undervalued by 63.7%. Track this in your watchlist or portfolio, or discover 927 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for EOG Resources.

Approach 2: EOG Resources Price vs Earnings

The Price-to-Earnings (PE) ratio is a commonly used valuation metric when analyzing profitable companies like EOG Resources. It indicates how much investors are willing to pay today for one dollar of current earnings, providing a quick gauge of what the market expects regarding the company’s future profitability.

A “normal” or “fair” PE ratio is not a fixed figure. It is influenced by factors such as earnings growth, perceived risk, and business stability or cyclicality. Higher expected growth often supports a higher PE, while elevated risks or slowing growth may warrant a lower one.

Currently, EOG Resources is trading at a PE of 10.42x. For reference, the average PE ratio among its industry peers is 12.88x, and the broader oil and gas industry has an average of 13.30x. These figures indicate that EOG shares are trading at a lower multiple compared to its sector.

One distinguishing aspect of this analysis is Simply Wall St’s “Fair Ratio,” which, in this case, is 18.96x. The Fair Ratio takes into account not only growth and profit margin, but also industry conditions, market capitalization, and unique risk factors that standard peer comparisons may overlook. This approach allows for a more comprehensive assessment of whether EOG should trade higher or lower based on its own fundamentals rather than just its position relative to competitors.

Comparing the Fair Ratio of 18.96x to EOG’s current PE of 10.42x highlights a significant discount. According to this broader valuation perspective, EOG Resources stock appears undervalued using the Preferred Multiple method.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1433 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your EOG Resources Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is simply your story of what you believe about a company’s future, tying together your expectations for growth, margins, risks, and the events that shape them to create your own fair value, beyond just blindly following the numbers.

This approach is intuitive and accessible for all investors. A Narrative lets you link what is happening in the real world to a financial forecast and, ultimately, a fair value for the stock. On Simply Wall St’s Community page, Narratives are used by millions to define their outlooks and see how their perspective compares to the market.

They make investing more dynamic, since your Narrative updates automatically when new information emerges, such as breaking news or quarterly earnings. Narratives help pinpoint if EOG Resources’ current share price is above or below your fair value, so you can decide whether to buy, hold, or sell with confidence.

For example, one investor’s Narrative might see EOG’s margin improvements and strategic acquisitions supporting a fair value near the most bullish analyst target of $170.00. Another might factor in commodity price volatility and ESG risks to justify a value closer to the most cautious outlook of $120.00, demonstrating the diversity of perspectives that real-world investing demands.

Do you think there's more to the story for EOG Resources? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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