Devon Energy Corporation (DVN) is a trending stock: facts to know before you bet on it – June 24, 2022
Devon Energy (NDV – Free Report) is one of the most viewed stocks by Zacks.com visitors lately. So it might be worth looking at some of the factors that could affect the stock’s short-term performance.
Over the past month, shares of this oil and gas exploration company have returned -25.8%, compared to a -4.3% change in the Zacks S&P 500 composite. During this period, the Zacks industry Oil and Gas – Exploration and Production – United States, which includes Devon Energy, lost 15.9%. The key question now is: what could be the future direction of the title?
While press releases or rumors about a substantial change in a company’s trading outlook usually “trend” its stock and cause an immediate price change, there are always fundamental facts that ultimately dominate the take. purchase and retention decision.
Revisions to earnings estimates
Rather than focusing on anything else, at Zacks we prioritize assessing change in a company’s earnings projection. Indeed, we believe that the fair value of its shares is determined by the present value of its future earnings streams.
Our analysis is primarily based on how sell-side analysts covering the stock revise their earnings estimates to reflect the latest trading trends. When a company’s earnings estimates increase, the fair value of its stock also increases. And when the fair value of a stock is higher than its current market price, investors tend to buy the stock, causing its price to rise. For this reason, empirical studies indicate a strong correlation between trends in earnings estimate revisions and short-term movements in stock prices.
Devon Energy is expected to post earnings of $2.29 per share for the current quarter, representing a 12-month change of +281.7%. Over the past 30 days, the Zacks consensus estimate has changed by +0.6%.
The current year earnings consensus estimate of $9.10 indicates a year-over-year change of +157.8%. This estimate has changed by +3.8% over the last 30 days.
For the next fiscal year, the consensus earnings estimate of $9.92 indicates a change of +9% from what Devon Energy was expected to report a year ago. Over the past month, the estimate has changed by +7.1%.
With an impressive externally audited track record, our proprietary stock rating tool – the Zacks Ranking – is a more conclusive indicator of a stock’s short-term price performance, as it effectively harnesses the power of earnings estimate revisions. . The magnitude of the recent consensus estimate change, along with three other factors related to earnings estimates, resulted in a Zacks No. 3 (hold) ranking for Devon Energy.
The chart below shows the evolution of the company’s consensus 12-month EPS estimate:
12 month EPS
Revenue Growth Forecasts
While a company’s earnings growth is arguably the best indicator of its financial health, nothing happens if it can’t grow its revenue. It is almost impossible for a company to increase its profits without increasing its revenue for long periods of time. Therefore, knowing the potential revenue growth of a business is crucial.
For Devon Energy, the current quarter sales consensus estimate of $4.67 billion indicates a year-over-year change of +93.1%. For the current and future fiscal years, the estimates of $18.46 billion and $18.7 billion indicate variations of +54.9% and +1.3%, respectively.
Latest reported results and history of surprises
Devon Energy reported revenue of $3.81 billion last quarter, representing a year-over-year change of +116.4%. EPS of $1.88 for the same period versus $0.45 a year ago.
Compared to the Zacks consensus estimate of $4.02 billion, reported revenue is a surprise of -5.12%. Surprise EPS was +8.05%.
The company has exceeded consensus EPS estimates in each of the past four quarters. The company has exceeded consensus revenue estimates three times during this period.
No investment decision can be effective without considering the valuation of a stock. Whether a stock’s current price accurately reflects the intrinsic value of the underlying business and the company’s growth prospects is a key determinant of its future price performance.
While comparing the current values of a company’s valuation multiples, such as the price-to-earnings (P/E) ratio, the price-to-sales (P/S) ratio, and the price-to-cash flow (P/CF) ratio , along with its own historical values help determine whether its stock is fairly valued, overvalued or undervalued, comparing the company against its peers on these metrics gives a good idea of the reasonableness of the stock price .
As part of the Zacks Style Scores system, the Zacks Value Style Score (which assesses both traditional and unconventional valuation metrics) organizes stocks into five groups ranging from A to F (A is better than B; B is better than C; and so on.), which is useful in determining whether a stock is overvalued, correctly valued, or temporarily undervalued.
Devon Energy is rated B on this front, indicating that it is trading at a discount to its peers. Click here to see values for some of the rating metrics that led to this rating.
The facts discussed here and plenty of other information on Zacks.com might help determine whether it’s worth paying attention to the market buzz about Devon Energy. However, its No. 3 Zacks ranking suggests it could perform in line with the broader market in the near term.