Is Trending Stock Equinor ASA (EQNR) a buy it now?

Equine (EQNR) recently made it to Zacks.com’s Most Wanted Stock list. Therefore, you may want to consider some of the key factors that may influence the stock’s performance in the near future.

Shares of this oil and gas company have returned +4.6% over the past month compared to the -4.1% change in the Zacks S&P 500 composite. The industry Zacks Oil and Gas – Refining and Marketing, at which Equinor belongs, gained 2.4% over this period. Now the key question is: where could the stock be heading in the near term?

Although media reports or rumors of a material change in a company’s business outlook usually cause its stock to trend and result in an immediate price change, there are always certain fundamental factors that ultimately determine the buy and hold decision.

Revisions to earnings estimates

At Zacks, we prioritize evaluating change in a company’s future earnings projection over anything else. This is because we believe that the present value of its future income stream is what determines the fair value of its stock.

We basically look at how sell-side analysts covering the stock are revising their earnings estimates to reflect the impact of the latest trading trends. And if earnings estimates increase for a company, the fair value of its shares increases. A higher fair value than the current market price stimulates investors’ interest in buying the stock, causing its price to rise. This is why empirical research shows a strong correlation between trends in earnings estimate revisions and short-term stock price movements.

For the current quarter, Equinor is expected to post earnings of $1.38 per share, indicating a change of +62.4% from the prior year quarter. The Zacks consensus estimate has changed by +6.2% over the past 30 days.

For the current year, the consensus earnings estimate of $6.31 indicates a change of +104.9% from the prior year. Over the last 30 days, this estimate has changed by +2.8%.

For the next fiscal year, the consensus earnings estimate of $4.92 indicates a change of -22.1% from what Equinor is expected to report a year ago. Over the past month, the estimate has changed by +3.3%.

With a strong externally audited track record, our proprietary stock rating tool, Zacks Rank, provides a more conclusive picture of a stock’s price direction in the short term, as it effectively harnesses the power of earnings estimate revisions. . Due to the magnitude of the recent consensus estimate change, along with three other factors related to earnings estimates, Equinor is ranked Zacks Rank #3 (Hold).

The chart below shows the evolution of the company’s consensus 12-month EPS estimate:

12 month EPS

Revenue Growth Forecasts

Although earnings growth is arguably the most superior indicator of a company’s financial health, nothing as such happens if a company is unable to increase its revenue. After all, it is almost impossible for a company to increase its profits for an extended period of time without increasing its revenue. It is therefore important to know the potential revenue growth of a company.

In the case of Equinor, the consensus sales estimate of $57.68 billion for the current quarter indicates a year-over-year change of +147.9%. Estimates of $203.84 billion and $179.52 billion for the current and next fiscal year indicate changes of +127.9% and -11.9%, respectively.

Latest reported results and history of surprises

Equinor reported revenue of $36.39 billion in the last quarter, representing a year-over-year change of +108.4%. EPS of $1.56 for the same period versus $0.49 a year ago.

Compared to the Zacks consensus estimate of $50.49 billion, reported revenue is a surprise of -27.94%. Surprise EPS was +8.33%.

The company has exceeded consensus EPS estimates in each of the past four quarters. The company couldn’t beat consensus revenue estimates for the past four quarters.

Evaluation

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 , 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 helps determine whether a stock is overvalued, correctly valued, or temporarily undervalued.

Equinor is rated A 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.

Conclusion

The facts discussed here and plenty of other information on Zacks.com might help determine whether or not it’s worth paying attention to the market buzz about Equinor. However, its No. 3 Zacks ranking suggests it could perform in line with the broader market in the near term.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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