The past six months have been a windfall for APA Corporation’s shareholders. The company’s stock price has jumped 43.6%, hitting $38.35 per share. This was partly thanks to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Following the strength, is APA a buy right now? Or is the market overestimating its value? Find out in our full research report, it’s free.
Why Are We Positive on APA Corporation?
Operating in three continents with a history stretching back to 1954, APA Corporation (NASDAQ: APA) explores for, develops, and produces crude oil, natural gas, and natural gas liquids in the U.S., Egypt, and the U.K. North Sea.
1. Long-Term Revenue Growth Shows Strong Momentum
Cyclical industries such as Energy can make mediocre companies look great for a time, but a long-term view reveals which businesses can actually withstand and adapt to changing conditions. Thankfully, APA Corporation’s 13.4% annualized revenue growth over the last five years was solid. Its growth surpassed the average energy upstream and integrated energy company and shows its offerings resonate with customers.
2. Economies of Scale Give It Negotiating Leverage with Suppliers
In Energy, scale separates fragile single-asset producers from platform-style businesses that generate revenue across entire basins and infrastructure networks.
APA Corporation’s $8.15 billion of revenue in the last year is top-tier for the industry, suggesting the company has hit a level of diversification where investors can sleep easy at night.
3. Excellent Free Cash Flow Margin Boosts Reinvestment Potential
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
APA Corporation has shown robust cash profitability, driven by its attractive business model that enables it to reinvest or return capital to investors. The company’s free cash flow margin averaged 17.5% over the last five years, quite impressive for an upstream and integrated energy business.
Final Judgment
These are just a few reasons why we think APA Corporation is a high-quality business, and with the recent rally, the stock trades at 6.1× forward P/E (or $38.35 per share). Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
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