Today, we explore the question: Is CNX Resources Corp (CNX, Financial) modestly undervalued? With a daily loss of -2.29%, a 3-month gain of 29.53%, and an Earnings Per Share (EPS) of 9.48, it's essential to delve into the stock's valuation analysis. Let's dissect the financials and operations of CNX Resources to determine its true worth.
Company Overview
CNX Resources Corp is an independent natural gas and midstream company. It focuses on the exploration, development, production, and acquisition of natural gas properties in the Appalachian Basin. The company's operating segments include Shale and Coalbed Methane, with the Shale segment generating maximum revenue. The company also has a nominal shallow oil and gas production segment.
As of September 14, 2023, CNX Resources (CNX, Financial) is trading at $22.02 per share, with a market cap of $3.60 billion. With a GF Value of $25.51, the stock appears to be modestly undervalued.
Understanding GF Value
The GF Value is a unique measure of a stock's intrinsic value, based on historical multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line provides an overview of the fair value at which the stock should ideally be traded. If the stock price significantly deviates from the GF Value Line, it may indicate overvaluation or undervaluation, consequently affecting its future returns.
Considering the GF Value, CNX Resources stock appears 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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Financial Strength
Before investing, it's crucial to assess a company's financial strength. Companies with poor financial strength pose a higher risk of permanent loss. The cash-to-debt ratio and interest coverage can give a sense of a company's financial health. CNX Resources has a cash-to-debt ratio of 0.01, which is lower than 95.33% of the companies in the Oil & Gas industry. This gives CNX Resources a financial strength rating of 5 out of 10, indicating fair financial health.
Profitability and Growth
Investing in profitable companies carries less risk, especially those with consistent profitability over the long term. CNX Resources has been profitable 4 years over the past 10 years. During the past 12 months, the company had revenues of $2.80 billion and Earnings Per Share (EPS) of $9.48. Its operating margin of 55.7% better than 93.12% of the companies in the Oil & Gas industry. Overall, GuruFocus ranks CNX Resources's profitability as fair.
One of the most important factors in the valuation of a company is growth. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of CNX Resources is 36.7%, which ranks better than 88.21% of the companies in the Oil & Gas industry. However, the 3-year average EBITDA growth is -19.2%, which ranks worse than 84.59% of the 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 help determine its profitability. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, CNX Resources's ROIC is 13.34, and its WACC is 6.77.
Conclusion
In conclusion, the stock of CNX Resources (CNX, Financial) is believed to be modestly undervalued. The company's financial condition is fair, and its profitability is fair. Its growth ranks worse than 84.59% of 824 companies in the Oil & Gas industry. To learn more about CNX Resources stock, you can check out its 30-Year Financials here.
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