What a time it’s been for APA Corporation. In the past six months alone, the company’s stock price has increased by a massive 72.5%, reaching $38.88 per share. This was partly thanks to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Is now still a good time to buy APA? Or is this a case of a company fueled by heightened investor enthusiasm? Find out in our full research report, it’s free.
Why Are We Positive On APA?
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
A company’s long-term performance can give signals about its business quality. Even a bad business, especially in a cyclical industry, can shine for a year or so, but a top-tier one should exhibit resilience through cycles. Over the last five years, APA Corporation grew its sales at a solid 15.6% compounded annual growth rate. 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
The size of the revenue base is a way to assess topline, and it tells an investor whether an Energy producer has crossed the line between being a more vulnerable commodity taker and a durable operating platform. Scaled businesses tend to produce and generate revenue from many wells, pads, takeaway routes, and geographies, not just a single field or drilling program.
APA Corporation’s $8.15 billion of revenue in the last year is top-tier for the industry, suggesting the type of diversification that reduces operational risk.
3. Excellent Free Cash Flow Margin Boosts Reinvestment Potential
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
APA Corporation has shown terrific cash profitability, driven by its lucrative business model that enables it to reinvest, return capital to investors, and stay ahead of the competition. The company’s free cash flow margin was among the best in the energy upstream and integrated energy sector, averaging 17.8% over the last five years.
Final Judgment
These are just a few reasons why we think APA Corporation is a great business, and after the recent rally, the stock trades at 6.8× forward P/E (or $38.88 per share). Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
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