Natural gas stocks have taken a hit as natural gas prices continue to trade on the low end. However, natural gas prices probably won't stay at current levels forever, and neither will the natural gas companies that so heavily depend on natural gas prices. As natural gas prices recover from their funk, gas stocks should benefit. Apache (APA) is one of those stocks that stands to benefit. The stock is significantly undervalued on all three metrics. Below is an in depth look at the valuation metrics and stock chart.
Valuation: Apache's trailing 5 year valuation metrics suggest that the stock is undervalued as all of the metrics are below their respective 5 year averages. Apache's current P/B ratio is 1.3 and it has averaged 1.9 over the past 5 years with a high of 2.8 and low of 1.2. Apache's current P/S ratio is 2.2 and it has averaged 3.1 over the past 5 years with a high of 4 and low of 1.9. Apache's current P/E ratio is 8.2 and it has averaged 11.7 over the past 5 years with a high of 15.7 and low of 7.4.
Price Target: The consensus price target for the analysts who follow Apache is $132. That is upside of 41% from today's stock price of $93.5 and suggests that the stock is undervalued at these levels. This also suggests that the stock has significant upside and is an attractive opportunity at these levels.
Forward Valuation: Apache is currently trading at about $94 a share with analysts expecting EPS of $13.94 next year, an earnings increase of 10% y/y, for a forward P/E ratio of 6.7. Taking a look at the company's publicly traded comparisons will give us a better idea of the stock's relative valuation. Andarko Petroleum (APC) is currently trading at about $75 a share with analysts expecting EPS of $5.05 next year, an earnings increase of 29% y/y, for a forward P/E ratio of 14.8. EOG Resources (EOG) is currently trading at about $104 a share with analysts expecting EPS of $6.8 next year, an earnings increase of 32% y/y, for a forward P/E ratio of 15.3. Devon Energy (DVN) is currently trading at about $69 a share with analysts expecting EPS of $7.28 next year, an earnings increase of 15% y/y, for a forward P/E ratio of 9.5. The mean forward P/E of Apache's competitors is 13.2 which suggests that Apache is undervalued relative to its publicly traded competitors.
Earnings Estimates: Apache has beat EPS estimates every time in the past 4 quarters. The company's EPS figures have come in between 7 cents and 31 cents from consensus estimates or about 2.4% to 12% from analyst estimates. The company has reported earnings that have differed from analyst estimates by a decent sized margin which suggests that the stock may experience some upside from earnings surprises.
Price Action: Apache is down 25.9% over the past year, underperforming the S&P 500, which is up 4.4%. Looking at the technicals, the stock is currently below its 50 day moving average, which sits at $104.32 and below its 200 day moving average, which sits at $101.56.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.