Low Price-to-Earnings Ratio
Attractive Price-to-Sales Ratio
Strong Gross Profit Margin
Good Return on Equity
Strong Interest Coverage
Moderate Debt Levels
Strong Portfolio and Strategic Positioning
Effective Capital Management
Growth in Gas Production
Cost Reduction Initiatives
Low Price-to-Book Ratio
Low Net Profit Margin
Low Liquidity Ratios
Challenges in Share Performance
Concerns About Production Guidance
Overall, APA Corporation demonstrates a strong business quality through its strategic asset positioning and effective capital management. However, challenges in share performance raise concerns about market confidence. Future prospects look promising with growth in gas production and cost reduction initiatives, although there are uncertainties regarding production guidance that could impact investor sentiment.
Analysis Date: February 27, 2025
Last Updated: March 11, 2025
Trailing Twelve Months (TTM) values provide a view of the company's performance over the last year.
Benjamin Graham's value investing approach focuses on finding stocks with a significant margin of safety between their intrinsic value and market price.
Intrinsic Value
Estimated fair value based on Graham's formula
$83.89
Current Market Price: $14.98
IV/P Ratio: 5.60x (>1.0 indicates undervalued)
Margin of Safety
Gap between intrinsic value and market price
82.0%
Graham recommended a minimum of 20-30% margin of safety
Higher values indicate a greater potential discount to fair value
Graham Criteria Checklist
Benjamin Graham's value investing checklist for APA
Positive earnings (5+ years)
Dividend history (5+ years)
P/E ratio ≤ 20 (6.97)
P/B ratio ≤ 1.5 (1.06)
Current ratio ≥ 2.0 (1.15x)
Long-term debt < Net current assets (13.34x)
Margin of safety (82.0%)
APA does not meet all Graham criteria
Trailing Twelve Months (TTM) values provide a view of the company's performance over the last year.
The gross profit margin of 57.72% indicates a strong ability to manage production costs effectively, leading to healthy profitability at the gross level.
Return on equity (ROE) at 13.60% suggests that the company is effective in generating profits from its equity base, which is a positive sign for investors.
The net profit margin of 8.26% indicates limited profitability after expenses, which may concern investors about the overall efficiency of the business.
Profitability metrics measure a company's ability to generate earnings relative to its revenue, operating costs, and other relevant metrics. Higher values generally indicate better performance.
Return on Equity (ROE)
Measures how efficiently a company uses its equity to generate profits
17.46%
Higher values indicate better returns for shareholders
TTM (as of 2025-04-16)
Return on Assets (ROA)
Measures how efficiently a company uses its assets to generate profits
1.83%
Higher values indicate better asset utilization
TTM (as of 2025-04-16)
Gross Profit Margin
Percentage of revenue retained after accounting for cost of goods sold
57.72%
Higher values indicate better efficiency in production
TTM (as of 2025-04-16)
Net Profit Margin
Percentage of revenue retained after accounting for all expenses
8.26%
Higher values indicate better overall profitability
TTM (as of 2025-04-16)
An interest coverage ratio of 10.0 highlights the company's ability to meet its interest obligations comfortably, indicating sound financial health.
A debt-to-equity ratio of 0.57 suggests that the company is not excessively leveraged, which can be a positive indicator for financial stability.
Current, quick, and cash ratios all at 0.21 indicate potential liquidity concerns, suggesting that the company may struggle to meet short-term obligations.
Financial health metrics assess a company's ability to meet its financial obligations and its overall financial stability.
Debt to Equity Ratio
Total debt divided by total equity
0.97x
Lower values indicate less financial leverage and risk
Less than 1.0 is conservative, 1.0-2.0 is moderate, >2.0 indicates high risk
Q4 2024
Current Ratio
Current assets divided by current liabilities
1.15x
Higher values indicate better short-term liquidity
Less than 1.0 is concerning, 1.0-2.0 is adequate, greater than 2.0 is good
Q4 2024
APA has strategically reshaped its portfolio by focusing on high-quality assets in the Permian Basin and Egypt. The company achieved a BBB- rating from S&P, indicating an investment-grade status, which enhances its credibility and financial stability. The shift towards unconventional production in the Permian, driving over 75% of adjusted production, positions APA competitively in the market.
The company demonstrated prudent capital allocation by returning 71% of free cash flow to shareholders through dividends and share repurchases. This reflects a commitment to shareholder value and confidence in its cash flow generation capabilities.
Despite positive financial metrics, APA's share price performance has been underwhelming, indicating potential issues with market perception or confidence in management's execution of growth plans.
APA has initiated a gas-focused drilling program in Egypt, with expectations of year-over-year gas production growth for the first time in over a decade. This new gas price agreement aligns gas economics with oil, creating new opportunities for drilling and production.
The company has set a target for $350 million in annualized savings by 2027, with early results already yielding $35 million in savings. These initiatives are expected to drive free cash flow expansion and enhance overall operational efficiency.
There are concerns about the visibility and accuracy of production guidance, particularly as the company transitions to a lower rig count and attempts to maintain production levels. This could impact investor confidence in future growth prospects.