ProPetro Holding Corp (PUMP, Financial) experienced a 5.7% loss on October 04, 2023, despite a 15.3% gain over the past three months. With an Earnings Per Share (EPS) (EPS) of 0.82, it raises the question; is the stock modestly undervalued? This article aims to provide a comprehensive valuation analysis of ProPetro Holding. So, let's delve into the details.
Introduction to ProPetro Holding
Based in Texas, ProPetro Holding Corp (PUMP, Financial) is an oilfield services company providing hydraulic fracturing, wireline, and other complementary services to oil and gas companies. The company focuses on the exploration and production of North American unconventional oil and natural gas resources, primarily in the Permian Basin. ProPetro Holding's stock price stands at $9.43, while its GF Value, an estimation of fair value, is $12.19. This suggests that the stock might be modestly undervalued.
Understanding the GF Value
The GF Value is a proprietary measure of a stock's intrinsic value. It's calculated based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line represents the fair trading value of the stock. If the stock price is significantly above the GF Value Line, it's overvalued, and its future return is likely to be poor. Conversely, if it's significantly below the GF Value Line, its future return will likely be higher.
ProPetro Holding (PUMP, Financial), with a market cap of $1.10 billion, is believed to be modestly undervalued. This suggests that the long-term return of its stock is likely to be higher than its business growth.
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ProPetro Holding's Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. Therefore, it's essential to review a company's financial strength before buying shares. ProPetro Holding has a cash-to-debt ratio of 1.04, ranking better than 59.26% of 1026 companies in the Oil & Gas industry. This suggests a strong balance sheet.
Profitability and Growth
Companies that have been consistently profitable over the long term offer less risk for investors. ProPetro Holding has been profitable 4 over the past 10 years, with an operating margin of 13.93%, ranking better than 60.16% of 979 companies in the Oil & Gas industry. However, its average annual revenue growth of -15.4% ranks worse than 87.21% of 860 companies in the same industry. The 3-year average EBITDA growth is -28.6%, which ranks worse than 89.95% of 826 companies in the Oil & Gas industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to the weighted average cost of capital (WACC) can provide insight into its profitability. ProPetro Holding's ROIC is 16.85, and its WACC is 13.76, indicating a strong performance relative to the capital invested in its business.
Conclusion
Overall, ProPetro Holding (PUMP, Financial) stock appears to be modestly undervalued. The company's financial condition is strong, and its profitability is fair. However, its growth ranks worse than 89.95% of 826 companies in the Oil & Gas industry. To learn more about ProPetro Holding stock, you can check out its 30-Year Financials here.
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