PBF Energy Inc (PBF, Financial) has recently experienced a daily gain of 3.56%, and a three-month gain of 25.71%. Its Earnings Per Share (EPS) stands at 24. However, the question arises, is the stock significantly overvalued? This article aims to shed light on PBF Energy's valuation, providing an in-depth analysis of its financial performance and future prospects. Read on to explore the company's intrinsic value and make informed investment decisions.
Introduction to PBF Energy Inc
PBF Energy Inc is an independent petroleum refiner and supplier of unbranded transportation fuels, heating oil, petrochemical feedstocks, lubricants, and other petroleum products in the United States. It owns refineries in Delaware, Ohio, New Jersey, California, and Louisiana, operating in two reportable business segments: Refining and Logistics. The company's oil refineries are engaged in refining crude oil and other feedstocks into petroleum products. PBFX, its logistics segment, operates assets such as crude oil and refined products terminals, pipelines, and storage facilities.
With a current price of $51.19 per share and a market cap of $6.30 billion, PBF Energy's stock appears to be significantly overvalued when compared to its GF Value of $34.22, which is an estimation of the stock's fair value. This forms the basis for a deeper exploration of the company's value.
Understanding GF Value
The GF Value is a proprietary measure of a stock's intrinsic value, computed considering historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line denotes the stock's ideal fair trading value. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher.
PBF Energy's stock appears to be significantly overvalued according to GuruFocus Value calculation. Given that PBF Energy is significantly overvalued, the long-term return of its stock is likely to be much lower than its future business growth.
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Financial Strength of PBF Energy
Investing in companies with poor financial strength has a higher risk of permanent loss of capital. Therefore, it's crucial to review the financial strength of a company before deciding to buy its stock. A great starting point for understanding a company's financial strength is looking at the cash-to-debt ratio. PBF Energy has a cash-to-debt ratio of 0.68, which is better than 54.65% of 1021 companies in the Oil & Gas industry. GuruFocus ranks the overall financial strength of PBF Energy at 8 out of 10, indicating that the financial strength of PBF Energy is strong.
Profitability and Growth of PBF Energy
Investing in profitable companies, especially those with consistent profitability over the long term, is generally less risky. A company with high profit margins is usually a safer investment than those with low profit margins. PBF Energy has been profitable for eight out of the past ten years. Over the past twelve months, the company had a revenue of $42.10 billion and Earnings Per Share (EPS) of $24. Its operating margin is 7.6%, which ranks worse than 52.33% of 967 companies in the Oil & Gas industry. Overall, the profitability of PBF Energy is ranked 7 out of 10, indicating fair profitability.
One of the most important factors in the valuation of a company is growth. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of PBF Energy is 22.4%, which ranks better than 75.06% of 850 companies in the Oil & Gas industry. The 3-year average EBITDA growth is 56.5%, which ranks better than 86.36% of 821 companies in the Oil & Gas industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can also evaluate a company's profitability. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC exceeds the WACC, the company is likely creating value for its shareholders. During the past 12 months, PBF Energy's ROIC is 31.57 while its WACC came in at 8.74.
Conclusion
In summary, the stock of PBF Energy appears to be significantly overvalued. The company's financial condition is strong and its profitability is fair. Its growth ranks better than 86.36% of 821 companies in the Oil & Gas industry. To learn more about PBF Energy stock, you can check out its 30-Year Financials here.
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