HF Sinclair Corp (DINO, Financial) has recently experienced a daily gain of 3.77% and a 3-month gain of 32.67%. The company's Earnings Per Share (EPS) (EPS) stands at 11.78. These promising figures have led many investors to ask: is HF Sinclair (DINO) fairly valued? This article aims to answer this question by providing an in-depth analysis of HF Sinclair's valuation. Read on to gain valuable insights into the company's financial performance and intrinsic value.
Company Introduction
HF Sinclair Corp (DINO, Financial) is an integrated petroleum refiner with a noteworthy footprint in the oil and gas industry. The company operates seven refineries across the Rockies, midcontinent, Southwest, and Pacific Northwest, boasting a total crude oil throughput capacity of 678,000 barrels per day. It also has the capability to produce 380 million gallons of renewable diesel annually. HF Sinclair's marketing business spans over 300 distributors and 1,500 wholesale branded sites across 30 states. The company also owns a 47% stake in Holly Energy Partners and has proposed to purchase the remaining 53%.
At a price of $60.59 per share, HF Sinclair (DINO, Financial) has a market cap of $11.20 billion. To better understand the company's value, we will compare this stock price with the GF Value, an estimation of fair value calculated by GuruFocus. This comparison will provide a comprehensive understanding of the company's intrinsic value.
Understanding the GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated based on historical trading multiples, a GuruFocus adjustment factor based on past returns and growth, and future business performance estimates. The GF Value Line provides an overview of the fair value at which the stock should ideally be traded.
According to GuruFocus, HF Sinclair's stock is fairly valued. This estimate is based on historical multiples, an internal adjustment based on the company's past business growth, and analyst estimates of future business performance. If the stock's share price is significantly above the GF Value Line, the stock may be overvalued and have poor future returns. On the other hand, if the stock's share price is significantly below the GF Value Line, the stock may be undervalued and have high future returns.
Because HF Sinclair is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth.
Financial Strength
Investing in companies with poor financial strength carries a higher risk of permanent loss of capital. Thus, it's crucial to review the financial strength of a company before deciding whether to buy its stock. A good starting point for understanding the financial strength of a company is looking at the cash-to-debt ratio and interest coverage. HF Sinclair has a cash-to-debt ratio of 0.46, which is worse than 51.81% of 1021 companies in the Oil & Gas industry. Despite this, GuruFocus ranks the overall financial strength of HF Sinclair at 8 out of 10, indicating that the financial strength of HF Sinclair is strong.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, is less risky. A company with high profit margins is usually a safer investment than those with low profit margins. HF Sinclair has been profitable 8 over the past 10 years. Over the past twelve months, the company had a revenue of $35 billion and Earnings Per Share (EPS) of $11.78. Its operating margin is 9.61%, which ranks better than 52.43% of 967 companies in the Oil & Gas industry. Overall, the profitability of HF Sinclair is ranked 8 out of 10, which indicates strong profitability.
Growth is probably the most important factor in the valuation of a company. GuruFocus research has found that growth is closely correlated with the long-term stock performance of a company. A faster-growing company creates more value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth of HF Sinclair is 21.8%, which ranks better than 74% of 850 companies in the Oil & Gas industry. The 3-year average EBITDA growth rate is 29.3%, which ranks better than 67.07% of 820 companies in the Oil & Gas industry.
ROIC vs WACC
Another way to evaluate a company's profitability is to compare its return on invested capital (ROIC) to its weighted cost of capital (WACC). Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (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 is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, HF Sinclair's ROIC was 18.91, while its WACC came in at 8.99.
Conclusion
In conclusion, the stock of HF Sinclair (DINO, Financial) is believed to be fairly valued. The company's financial condition is strong and its profitability is strong. Its growth ranks better than 67.07% of 820 companies in the Oil & Gas industry. To learn more about HF Sinclair stock, you can check out its 30-Year Financials here.
To find out the high-quality companies that may deliver above-average returns, please check out GuruFocus High Quality Low Capex Screener.
