devon energy (DVN – Free Report) has been one of the most-watched stocks by Zacks.com visitors lately. Therefore, we recommend considering several factors that can affect a stock's short-term performance.
Over the past month, the oil and gas exploration company's stock has increased by +9.6%. This compares to a +1.8% change in the Zacks S&P 500 Composite Index. During this period, the Zacks Oil & Gas – Exploration & Production – United States industry, which belongs to Devon Energy Inc., rose 7.4%. The key question here is: What is the future direction of the stock price?
While media reports and rumors about significant changes in a company's business outlook typically trigger stock price trends and lead to immediate price movements, there are always certain fundamental factors that ultimately drive the buy-and-hold decision. Exists.
Regarding revisions to performance forecasts
Zacks prioritizes evaluating changes in a company's future earnings expectations above all else. That's because we believe that the present value of future income streams determines the fair value of a stock.
Our analysis is fundamentally based on how the sell-side analysts covering a given stock are revising their earnings estimates to account for the latest business trends. As a company's earnings expectations rise, so does the fair value of its stock. And when a stock's fair value is higher than its current market price, investors tend to buy the stock, which causes the stock price to rise. For this reason, empirical research has shown that there is a strong correlation between trends in earnings forecast revisions and short-term stock price movements.
For the current quarter, Devon Energy is expected to post earnings of $1.14 per share, representing a decline of 21.9% from the year-ago period. The Zacks Consensus Estimate has changed -9.9% over the past 30 days.
The consensus earnings estimate for the current fiscal year of $4.91 represents a -14% year-over-year change. This estimate has changed -8.3% over the past 30 days.
Next year's consensus earnings estimate of $5.54 represents a +12.8% change from the earnings Devon Energy was expected to report a year ago. Over the past month, the forecast has changed by -3.1%.
The Zacks Rank, a proprietary stock evaluation tool with a strong, outside-audited track record, effectively harnesses the power of earnings estimate revisions to deliver a more definitive picture about near-term stock price direction. We provide. The magnitude of recent consensus estimate changes, as well as three other factors related to earnings expectations, give Devon Energy a Zacks Rank #4 (Sell).
The chart below shows the company's consensus EPS estimate over the next 12 months over time.
12 months EPS
Expected revenue growth rate
There's no question that a company's profit growth is the best indicator of its financial health, but nothing will happen if it doesn't make a profit. It's nearly impossible for a company to expand its bottom line without growing it over the long term. Therefore, it's important to know a company's earnings growth potential.
For Devon Energy, the current quarter's consensus revenue estimate of $3.59 billion represents a -6% change from the year-ago period. The current and next fiscal year estimates of $14.83 billion and $15.27 billion represent changes of -2.8% and +2.9%, respectively.
Last reported results and surprising details
Devon Energy reported revenue of $4.15 billion in its last reported quarter. This represents a -3.6% year-over-year change. EPS for the same period was $1.41, compared to $1.66 in the year-ago period.
The reported earnings represent a surprise of +7.11% when compared to the Zacks Consensus Estimate of $3.87 billion. EPS surprise was +1.44%.
The company beat consensus EPS estimates in each of the trailing four quarters. He's the only time the company has exceeded consensus revenue estimates during this period.
evaluation
You cannot make efficient investment decisions without considering stock valuation. 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 future stock performance.
The present value of a company's valuation multiples, such as price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF), and the past value of your company Comparing a company to its peers based on these parameters can help you see if it is overvalued, overvalued or undervalued, but how reasonable its stock is You can get to know better.
The Zacks Value Style Score (part of the Zacks Style Scores system) pays close attention to both traditional and non-traditional valuation metrics and rates stocks from A to F, where A is better than B. , B is better than C, A is better than B, and B is better than C). ), can be very helpful in identifying whether a stock is overvalued, properly valued, or temporarily undervalued.
Devon Energy is rated B on this score, indicating that it trades at a discount to its peers. Click here to see the values of some of the metrics that determined this grade.
conclusion
The facts discussed here, and many others on Zacks.com, may help you decide whether the market buzz surrounding Devon Energy is worth paying attention to. However, the company's Zacks Rank #4 suggests it may underperform the broader market in the short term.
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