With a recent daily loss of 2.96% and a 3-month decline of 15.07%, investors in Vermilion Energy Inc (VET, Financial) may be questioning the stock's current valuation. Amidst these fluctuations, the company's Earnings Per Share (EPS) stands at 4.22. This analysis seeks to determine whether Vermilion Energy's stock is fairly valued, and invites readers to delve into the comprehensive valuation analysis that follows.
Company Introduction
Vermilion Energy Inc is an international oil and gas producer, engaging in full-cycle exploration and production with a focus on North America, Europe, and Australia. The company has a reputation for maintaining production levels through advanced drilling and well-completion techniques. The majority of its revenue, which primarily comes from petroleum and natural gas sales, is derived from the Canadian market. When comparing the current stock price of $12.46 to the GF Value of $11.69, a measure of intrinsic value, Vermilion Energy appears to be fairly valued. This sets the stage for a deeper dive into the company's financial health and market position.
Summarize GF Value
The GF Value is an exclusive metric that represents the intrinsic value of a stock, derived from historical trading multiples, a GuruFocus adjustment factor for past performance and growth, and future business performance estimates. If a stock's price is significantly above this line, it may be overvalued, while a price well below suggests undervaluation and potential for higher future returns. At a current price of $12.46, Vermilion Energy (VET, Financial) is considered fairly valued, closely aligning with the GF Value Line. This suggests that long-term returns for Vermilion Energy's stock could mirror the company's business growth rate.
Financial Strength
Investors must consider a company's financial strength to avoid high risk and potential capital loss. Factors like the cash-to-debt ratio and interest coverage are crucial in assessing financial health. Vermilion Energy's cash-to-debt ratio is 0, ranking lower than the industry average, indicating a need for caution. However, the company's overall financial strength is fair, with a score of 6 out of 10.
Profitability and Growth
Consistent profitability is a sign of a less risky investment. Vermilion Energy has maintained profitability for 7 out of the past 10 years, with a solid operating margin of 27.3%, ranking well within its industry. The company's profitability score is 7 out of 10. In terms of growth, Vermilion Energy's annual revenue growth rate of 21.7% outperforms a majority of its peers, and its 3-year average EBITDA growth of 40.9% is also notable, indicating a strong potential for value creation.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) is essential in evaluating value creation. Vermilion Energy's ROIC of 6.87% is slightly below its WACC of 7.98%, suggesting that the company must improve its efficiency in generating returns on invested capital to create more value for shareholders.
Conclusion
Overall, Vermilion Energy (VET, Financial) is believed to be fairly valued, with fair financial health and profitability. The company's growth is commendable, ranking better than many of its industry counterparts. For a more detailed financial analysis, investors can review Vermilion Energy's 30-Year Financials here.
To discover high-quality companies that may deliver above-average returns, please check out the GuruFocus High Quality Low Capex Screener.
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.
