CONSOL Energy Inc (CEIX, Financial) recently experienced a daily loss of 5.53%, adding to a 3-month decline of 2.38%. Despite these market fluctuations, the company boasts a robust Earnings Per Share (EPS) of 19.99. Investors and analysts alike may ponder whether CONSOL Energy's current stock valuation accurately reflects its true worth or if it is significantly overvalued. This article delves into the intricacies of CONSOL Energy's valuation, inviting readers to explore the detailed analysis that follows.
Company Introduction
CONSOL Energy Inc is a prominent player in the energy sector, focusing on the production and export of high-BTU bituminous thermal coal. The company prides itself on its longwall mining operations within the nation and its export terminals located along the Eastern seaboard. CONSOL Energy's business model revolves around mining, preparation, and the sale of thermal coal predominantly to power generators, with the PAMC segment being the main revenue driver. At the heart of this analysis is the comparison between CONSOL Energy's stock price, currently at $93.07, and the GF Value, an estimated fair value of $48.88, suggesting a potential overvaluation.
Summarize GF Value
The GF Value is a unique measure of a stock's intrinsic value, taking into account historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and anticipated future business performance. The GF Value Line serves as a benchmark, indicating the fair value at which the stock should ideally trade. When a stock's price considerably exceeds the GF Value Line, it may be overvalued, hinting at potentially poor future returns. Conversely, a price well below the GF Value Line could signal undervaluation and the prospect of higher future returns.
CONSOL Energy's current market cap stands at $2.90 billion, with the stock appearing significantly overvalued according to the GF Value. This disparity implies that the long-term return of CONSOL Energy's stock may fall short of its future business growth.
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Financial Strength
Investing in companies with solid financial strength is crucial to mitigate the risk of capital loss. Key indicators such as the cash-to-debt ratio, which for CONSOL Energy stands at 1.13, provide insights into the company's financial robustness. Despite being lower than 59.66% of its peers in the Other Energy Sources industry, CONSOL Energy's overall financial strength is commendable, with a GuruFocus rating of 8 out of 10.
Profitability and Growth
Profitable companies, especially those with consistent performance, often pose less investment risk. CONSOL Energy, with its impressive 8-year profitability streak, is a testament to this. The past year saw the company generate $2.50 billion in revenue and an Earnings Per Share (EPS) of $19.99. Its operating margin of 32.25% outperforms 82.95% of its industry counterparts, securing a fair profitability rank of 5 out of 10 from GuruFocus.
However, CONSOL Energy's growth metrics suggest room for improvement. The company's 3-year average revenue growth rate trails behind 76.27% of companies in the Other Energy Sources industry, while its EBITDA growth rate also falls short when compared to industry standards.
ROIC vs WACC
An insightful profitability metric is the comparison between a company's Return on Invested Capital (ROIC) and its Weighted Average Cost of Capital (WACC). A higher ROIC than WACC indicates efficient capital usage. CONSOL Energy's ROIC stands at an impressive 28.93, substantially exceeding its WACC of 7.09, highlighting its effective capital allocation.
Conclusion
In conclusion, CONSOL Energy (CEIX, Financial) appears to be significantly overvalued when considering its current market price in relation to the GF Value. Although the company maintains a strong financial foundation and fair profitability, its growth metrics do not align with industry leaders. For a more detailed understanding of CONSOL Energy's financial health, interested parties are encouraged to review its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
