We have noted EOG Resources's positive performance Friday, during which it logged a 1.3% outperformance of the S&P 500. At its current price of $142.23, the company is now trading in range of its average target price of $149.69, which calls into question its ability to keep moving higher. Analysts have given the Fossil Fuel Exploration and Production stock target prices ranging from $125 to $177 dollars per share, with an average rating of buy.
The market seems to share this optimistic view, since EOG Resources has a short interest of only 1.3% (this is the percentage of the share float that is being shorted). Each short position represents an investor's expectation that the price of the stock will decrease in the future.
When a stock is sold short, it means an investor has borrowed shares of the stock from their broker, and then sold them at the going market price. The investor hopes for the price to decline, so that they might buy those shares back at a lower price in the future. Once they do, they can return the borrowed shares to their broker, and keep the profit they made on the transaction.
One way to get an idea of the market sentiment on a stock is to check its rate of institutional ownership. In the case of EOG Resources, institutional investors own 89.7% of the shares. This would indicate a positive sentiment towards the stock among institutions. What does this really tell us?
Institutional investors such as hedge funds, investment firms, and wealth managers devote significant resources to identifying good investments. If they have decided to invest in EOG, it probably means they believe it is a solid investment choice. But it could also mean they are buying up shares in an effort to acquire the company or get seats on the board of directors. Also bear in mind that institutions are fallible (just maybe not quite as fallible as the average retail investor), so they may simply be wrong when they think they've found a good stock.
Overall, there is exuberant market sentiment on EOG Resources because of its an analyst consensus of some upside potential, a buy rating, a very low short interest, and a significant number of institutional investors. Warren Buffett famously said that in the short term, markets are voting mechanisms, but in the long term, they are weighing mechanisms. This means that long term investors should be aware of a stock's fundamentals before committing.
Buffett was one of the fist investors to focus on free cash flow as a yardstick for a company's health. Here are EOG's recent cash flows:
| Date Reported | Cash Flow from Operations ($) | Capital expenditures ($) | Free Cash Flow ($) | YoY Growth (%) |
|---|---|---|---|---|
| 2021-12-31 | 8,791,000,000.0 | -3,850,000,000.0 | 4,941,000,000.0 | 220.22 |
| 2020-12-31 | 5,008,000,000.0 | -3,465,000,000.0 | 1,543,000,000.0 | -11.37 |
| 2019-12-31 | 8,163,000,000.0 | -6,422,000,000.0 | 1,741,000,000.0 | 2.89 |
| 2018-12-31 | 7,768,608,000.0 | -6,076,475,000.0 | 1,692,133,000.0 | n/a |
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