We've been asking ourselves recently if the market has placed a fair valuation on Equinor ASA. Let's dive into some of the fundamental values of this large-cap Energy company to determine if there might be an opportunity here for value-minded investors.
A Very Low P/E Ratio but Trades Above Its Graham Number:
Equinor ASA, an energy company, engages in the exploration, production, transportation, refining, and marketing of petroleum and other forms of energy in Norway and internationally. The company belongs to the Energy sector, which has an average price to earnings (P/E) ratio of 7.54 and an average price to book (P/B) ratio of 1.68. In contrast, Equinor ASA has a trailing 12 month P/E ratio of 3.2 and a P/B ratio of 3.13.
Equinor ASA has moved -18.0% over the last year compared to 13.3% for the S&P 500 — a difference of -31.0%. Equinor ASA has a 52 week high of $42.53 and a 52 week low of $25.23.
Low Leverage Levels and Exceptional EPS Growth:
| 2019-12-31 | 2020-12-31 | 2021-12-31 | 2022-12-31 | |
|---|---|---|---|---|
| Revenue (MM) | $62,911 | $45,753 | $88,744 | $149,004 |
| Gross Margins | 32.1% | 20.8% | 47.2% | 59.6% |
| Operating Margins | 14.5% | -7.6% | 37.1% | 52.5% |
| Net Margins | 2.93% | -12.04% | 9.65% | 19.29% |
| Net Income (MM) | $1,843 | -$5,510 | $8,563 | $28,746 |
| Net Interest Expense (MM) | -704 | -836 | -657 | -157 |
| Net Interest Expense (MM) | -$704 | -$836 | -$657 | -$157 |
| Depreciation & Amort. (MM) | -$13,204 | -$15,235 | -$11,719 | -$6,391 |
| Earnings Per Share | $0.55 | -$1.69 | $2.63 | $9.03 |
| EPS Growth | n/a | -407.27% | 255.62% | 243.35% |
| Diluted Shares (MM) | 3,334 | 3,277 | 3,254 | 3,111 |
| Free Cash Flow (MM) | $3,545 | $1,910 | $20,776 | $26,378 |
| Capital Expenditures (MM) | -$10,204 | -$8,476 | -$8,040 | -$8,758 |
| Net Current Assets (MM) | -$52,127 | -$55,894 | -$45,595 | -$25,863 |
| Current Ratio | 1.27 | 1.62 | 1.6 | 1.78 |
| Long Term Debt (MM) | $24,945 | $32,338 | $27,404 | $24,141 |
| Net Debt / EBITDA | 1.03 | 2.66 | 0.5 | 0.17 |
Equinor ASA benefits from exceptional EPS growth, low leverage, and growing revenues and decreasing reinvestment in the business. The company's financial statements show decent operating margins with a positive growth rate and generally positive cash flows. However, the firm has slimmer gross margins than its peers. Finally, we note that Equinor ASA has a decent current ratio.
