EOG Resources Inc (NYSE:EOG) is considered a high growth stock. However its last closing price of $118.55 left investors wondering whether this growth has already been factored into the share price. Let’s look into this by assessing EOG’s expected growth over the next few years.
Check out our latest analysis for EOG Resources
What can we expect from EOG Resources in the future?
If you are bullish about EOG Resources’s growth potential then you are certainly not alone. The consensus forecast from 20 analysts is extremely positive with earnings forecasted to rise significantly from today’s level of $6.718 to $10.427 over the next three years. On average, this leads to a growth rate of 21% each year, which signals a market-beating outlook in the upcoming years.
Is EOG’s share price justifiable by its earnings growth?
EOG Resources is available at price-to-earnings ratio of 17.65x, showing us it is overvalued based on current earnings compared to the oil and gas industry average of 14.57x , and undervalued relative to the current US market average of 19.17x . This multiple is a median of profitable companies of 25 Oil and Gas companies in US including Vanguard Natural Resources, Grupo TMM and PEDEVCO.
After looking at EOG’s value based on current earnings, we can see it seems overvalued relative to other companies in the industry. However, seeing as EOG Resources is perceived as a high-growth stock, we must also account for its earnings growth, which is captured in the PEG ratio. A PE ratio of 17.65x and expected year-on-year earnings growth of 21% give EOG Resources a low PEG ratio of 0.83x. This tells us that when we include its growth in our analysis EOG Resources’s stock can be considered fairly valued , based on fundamental analysis.
What this means for you:
EOG’s current undervaluation could signal a potential buying opportunity to increase your exposure to the stock, or it you’re a potential investor, now may be the right time to buy. However, basing your investment decision off one metric alone is certainly not sufficient. There are many things I have not taken into account in this article and the PEG ratio is very one-dimensional. If you have not done so already, I urge you to complete your research by taking a look at the following:
- Financial Health: Are EOG’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Past Track Record: Has EOG been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of EOG’s historicals for more clarity.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.