PBF Energy Inc (PBF, Financial) recently recorded a daily loss of 6.78 %, despite a 3-month gain of 21.33%. The company's Earnings Per Share (EPS) stands at 24. However, the question arises: is PBF Energy (PBF) significantly overvalued? In this article, we dissect the valuation analysis of PBF Energy, providing a comprehensive understanding of its financial performance and intrinsic worth.
Introduction to PBF Energy
PBF Energy Inc is a prominent independent petroleum refiner and supplier in the United States. The company specializes in providing unbranded transportation fuels, heating oil, petrochemical feedstocks, lubricants, and other petroleum products. With refineries in several states, PBF Energy operates in two key business segments: Refining and Logistics. Despite the company's robust operations, its stock price is currently higher than the GF Value, suggesting that it might be overvalued.
Decoding the GF Value
The GF Value is a unique valuation model that calculates a stock's intrinsic value based on historical trading multiples, an internal adjustment factor, and future business performance estimates. The GF Value Line provides a visual representation of the stock's fair trading value. If the stock price is significantly above the GF Value Line, it indicates that the stock is overvalued and may offer poor future returns. Conversely, if the stock price is significantly below the GF Value Line, the stock may be undervalued, promising higher future returns. Currently, PBF Energy's stock price of $48.71 per share suggests significant overvaluation.
Given the overvaluation of PBF Energy, the long-term return of its stock is likely to be lower than its future business growth. For potentially higher future returns at reduced risk, consider exploring these companies.
Financial Strength of PBF Energy
Before investing in a company, it's crucial to assess its financial strength. Investing in companies with poor financial strength can lead to higher risk of permanent loss. A great way to understand a company's financial strength is by looking at its cash-to-debt ratio and interest coverage. PBF Energy has a cash-to-debt ratio of 0.68, better than 54.58% of 1026 companies in the Oil & Gas industry, indicating strong financial health.
Profitability and Growth of PBF Energy
Companies with consistent profitability over the long term generally offer less risk to investors. PBF Energy has been profitable 8 out of the past 10 years, with a revenue of $42.10 billion and Earnings Per Share (EPS) of $24 in the past twelve months. However, its operating margin of 7.6% ranks lower than 52.09% of 979 companies in the Oil & Gas industry, indicating fair profitability.
In terms of growth, PBF Energy's average annual revenue growth is 22.4%, ranking better than 74.3% of 860 companies in the Oil & Gas industry. The company's 3-year average EBITDA growth is 56.5%, outperforming 86.56% of 826 companies in the industry.
ROIC vs WACC
A company's profitability can also be evaluated by comparing its Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC). If the ROIC exceeds the WACC, the company is likely creating value for its shareholders. Over the past 12 months, PBF Energy's ROIC is 31.57, significantly higher than its WACC of 9.01.
Conclusion
In conclusion, PBF Energy's stock appears to be significantly overvalued. Despite the company's strong financial condition and fair profitability, its growth ranks better than 86.56% of 826 companies in the Oil & Gas industry. To delve deeper into PBF Energy's financials, check out its 30-Year Financials here.
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