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Where Apache’s Relative Valuation Stands next to Peers

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Apache’s EV-to-EBITDA multiple

Apache’s (APA) forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple is 6.3x. By comparison, Concho Resources (CXO) is currently trading at a higher forward EV-to-EBITDA multiple of ~11.3x.

Cimarex Energy (XEC), Continental Resources (CLR), and Devon Energy (DVN) are all trading at slightly lower multiples of ~8.9x, ~8.6x, and ~8.4x, respectively.

As you can see from the above chart, Apache seems to be undervalued next to its peers’ average of ~8.7x.

Return on equity

Apache’s returns, when profitability is scaled by shareholder equity, were decent compared to its peers. This calculation is referred to as ROE (return on equity), and Apache’s ROE stands at ~10%. Among Apache’s peers, Continental Resources has the worst ROE of about -0.6%.

Debt-to-asset ratio

As you can see from the chart, Apache has the second-highest debt-to-asset ratio of ~39% among its peers.

The debt-to-asset ratio is used to measure a company’s leverage. A higher percentage means that a higher proportion of a company’s assets are financed through debt. The higher the ratio, the higher the financial risk. Continental Resources’ debt-to-asset ratio is the highest among peers at 47%.

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