Long-established in the Oil & Gas industry, EQT Corp (EQT, Financial) has enjoyed a stellar reputation. It has recently witnessed a daily gain of 0.93%, juxtaposed with a three-month change of 8.91%. However, fresh insights from the GF Score hint at potential headwinds. Notably, its diminished rankings in financial strength, growth, and valuation suggest that the company might not live up to its historical performance. Join us as we dive deep into these pivotal metrics to unravel the evolving narrative of EQT Corp.
What Is the GF Score?
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
- Financial strength rank: 5/10
- Profitability rank: 5/10
- Growth rank: 7/10
- GF Value rank: 1/10
- Momentum rank: 5/10
Based on the above method, GuruFocus assigned EQT Corp the GF Score of 67 out of 100, which signals poor future outperformance potential.
Understanding EQT Corp's Business
EQT Corp is an independent natural gas production company with a market cap of $16.89 billion and sales of $5.07 billion. With an operating margin of 12.99%, the company focuses on the Marcellus and Utica shales in the Appalachian Basin, located in the Eastern United States. EQT Corp is dedicated to executing combo-development projects, developing multiwell pads to meet supply needs, and maximizing operational efficiency, technology, and sustainability. Its main customers include marketers, utilities, and industrial operators in the Appalachian Basin. The company has one reportable segment and its revenue stems from three types of gas reserves: natural gas, natural gas liquids, and crude oil. All of the firm's operating revenue is generated in the U.S., with most revenue flowing from the Marcellus Shale field and through the sale of natural gas.
Financial Strength Breakdown
EQT Corp's financial strength indicators present some concerning insights about the company's balance sheet health. The company's interest coverage ratio of 3 positions it worse than 74.44% of 759 companies in the Oil & Gas industry. This ratio highlights potential challenges the company might face when handling its interest expenses on outstanding debt. The esteemed investor Benjamin Graham typically favored companies with an interest coverage ratio of at least five.
The company's Altman Z-Score is just 1.61, which is below the distress zone of 1.81. This suggests that the company may face financial distress over the next few years. Additionally, the company's low cash-to-debt ratio at 0.01 indicates a struggle in handling existing debt levels.
Profitability Breakdown
EQT Corp's low Profitability rank can also raise warning signals. The company's profitability metrics, which are crucial indicators of its ability to generate income relative to revenue, assets, operating costs, and equity, are not at an ideal level. This could be a red flag for investors looking for companies with strong earnings potential.
Next Steps
Considering EQT Corp's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential underperformance. Investors should weigh these factors carefully when evaluating the company's future prospects. While the oil and gas sector can be volatile and influenced by external factors such as geopolitical events and environmental regulations, EQT Corp's current financial health and market valuation may not position it favorably against these challenges.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen.
As EQT Corp navigates the complexities of the energy market, will it be able to strengthen its financial position and enhance profitability to defy the odds suggested by its GF Score? Only time will tell, but informed investors will keep a close eye on the evolving landscape.
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.
