In This Article:
- By GF Value
The stock of Whiting Petroleum (NYSE:WLL, 30-year Financials) is estimated to be significantly overvalued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock 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. At its current price of $40.75 per share and the market cap of $1.6 billion, Whiting Petroleum stock gives every indication of being significantly overvalued. GF Value for Whiting Petroleum is shown in the chart below.
Because Whiting Petroleum is significantly overvalued, the long-term return of its stock is likely to be much lower than its future business growth.
Link: These companies may deliever higher future returns at reduced risk.
Since investing in companies with low financial strength could result in permanent capital loss, investors must carefully review a company's financial strength before deciding whether to buy shares. Looking at the cash-to-debt ratio and interest coverage can give a good initial perspective on the company's financial strength. Whiting Petroleum has a cash-to-debt ratio of 0.06, which ranks worse than 81% of the companies in Oil & Gas industry. Based on this, GuruFocus ranks Whiting Petroleum's financial strength as 2 out of 10, suggesting poor balance sheet. This is the debt and cash of Whiting Petroleum over the past years:
Companies that have been consistently profitable over the long term offer less risk for investors who may want to purchase shares. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. Whiting Petroleum has been profitable 5 over the past 10 years. Over the past twelve months, the company had a revenue of $548.7 million and loss of $46.01 a share. Its operating margin is -24.97%, which ranks worse than 76% of the companies in Oil & Gas industry. Overall, the profitability of Whiting Petroleum is ranked 3 out of 10, which indicates poor profitability. This is the revenue and net income of Whiting Petroleum over the past years: