EOG Stock Study (11-17-25)

Posted by Mark on April 7, 2025 at 07:06 | Last modified: November 17, 2025 09:52

I recently did a stock study on EOG Resources, Inc. (EOG, $110.40). Previous study is here.

M* writes:

     > EOG Resources is an oil and gas producer with acreage in several
     > US shale plays, primarily in the Permian Basin and the Eagle
     > Ford. At the end of 2024, it reported net proven reserves of
     > 4.7 billion barrels of oil equivalent. Net production averaged
     > roughly 1,062 thousand barrels of oil equivalent per day in 2024
     > at a ratio of 65% oil and natural gas liquids and 31% natural gas.

I usually avoid energy companies because visual inspection sometimes fails due to cyclicality. I’m not convinced we should blacklist the entire sector, however, because I do think it possible to realize phenomenal returns every now and then.

Visual inspection for EOG cleans up relatively well with the exclusion of 2015, ’16, and ’20 from the full analysis (negative EPS). ’20 probably makes sense due to COVID-19. Rather than dig to figure out plausible excuses for ’15-’16, I will note this is a capital-intensive business due to high costs of exploration, extraction, and refining that requires continuous investment in equipment, infrastructure, and technology.

Pressing onward with stated exclusions, since 2017 the large-size company has grown sales and earnings at annualized rates of 10.5% and 17.6%, respectively. Lines are somewhat up, straight, and parallel with YOY sales+EPS declines in ’19 and ’23 and EPS dip in ’24. 5- (8-) year EPS R^2 is 0.31 (0.83), and Value Line (VL) gives an Earnings Predictability score of 45.

Since 2017, PTPM leads peer and industry averages while increasing from 5.9% to 35.2% in ’24 with a last-4-year mean of 35.2%. ROE also leads peer and industry averages while ranging from 13.0% in ’19 to 32.6% in ’22 with a last-4-year mean of 25.6%. Debt-to-Capital is less than peer and industry averages while falling from 28.2% to 14.7% (’24) with a last-4-year mean of 16.2%.

Quick Ratio is 1.3 and Interest Coverage 35 per M* who assigns “Narrow” Economic Moat, rrates the company “Exemplary” for Capital Allocation, and gives a B grade for Financial Health (per BI website). VL gives an A grade for Financial Strength.

With regard to sales growth:

• YF projects YOY 4.8% contraction and 4.4% growth for ’25 and ’26, respectively (based on 8 analysts).
• Zacks projects YOY 3.3% contraction and 8.6% growth for ’25 and ’26, respectively (7).
• VL projects 6.7% annualized growth from ’24-’29.
• CFRA projects 3.6% contraction YOY and 5.1% growth per year for ’25 and ’24-’26, respectively.
• M* provides a 2-year ACE of 1.3% contraction/year.

My 1.0% per year forecast is near bottom of the range.

With regard to EPS growth:

• MarketWatch projects 3.0% and 4.5% per year for ’24-’26 and ’24-’27, respectively (based on 38 analysts).
• Nasdaq.com projects 7.9% and 4.1% per year for ’25-’27 and ’25-’28 [11 / 6 / 1 analyst(s) for ’25 / ’27 / ’28].
• Seeking Alpha projects 4-year annualized growth of 4.6%.
• Argus projects 5-year annualized growth of 16.0%.
• Finviz gives ACE 5-year annualized growth of 3.1% (11).
• LSEG estimates LTG at 6.1%.
• YF projects YOY 12.6% contraction and 6.3% growth for ’25 and ’26 (27).
• Zacks projects YOY 13.6% and 1.8% for ’25 and ’26 (11) along with 5-year annualized growth of 1.3%.
• VL projects 5.2% annualized growth from ’24-’29.
• CFRA projects contraction of 12.6% YOY and 2.9% per year for ’25 and ’24-’26 along with a 3-year CAGR of 4.0%.
• M* projects long-term annualized growth of 4.9%.

My 2.0% per year forecast is toward bottom of the long-term-estimate range (mean of seven: 5.9%). Initial value is ’24 EPS of $11.25/share rather than 2025 Q3 EPS of $10.04 (TTM).

My Forecast High P/E is 11.0. Since 2017, high P/E falls from 24.6 to 12.4 (’24) with a last-4-year mean of 11.7 and a last-4-year-mean average P/E of 9.6. I am near bottom of the range (only ’23 is less).

My Forecast Low P/E is 6.5. Since 2017, low P/E falls from 18.4 to 9.7 (’24) with a last-4-year mean of 7.5. I am forecasting toward bottom of the range [only ’21 (6.1) is less].

My Low Stock Price Forecast (LSPF) of $84.20 is default based on initial value from above. This is 23.7% less than the previous closing price and 17.9% less than the 52-week low.

Since 2017, Payout Ratio (PR) increases from 15.0% to 32.4% in ’24 with a last-4-year mean of 25.2%. I am forecasting below the range at 12.0%.

These inputs land EOG in the HOLD zone with a U/D ratio of 1.0. Total Annualized Return (TAR) is 5.4%.

PAR (using Forecast Average—not High—P/E) of 1.1% is less than the current risk-free rate (T-bills). If a healthy margin of safety (MOS) anchors this study, then I can proceed based on TAR albeit still less than I seek from any size company.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on only 13 studies (my study and seven other outliers excluded) over the past 90 days, averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, Forecast Low P/E, and PR are 5.0%, 5.8%, 11.7, 7.5, and 23.8%, respectively. I am lower across the board (although sample is too small for statistically valid comparison). VL’s future annual P/E of 14.0 is higher than MS (9.6) and higher than mine (8.8).

MS high / low EPS are $14.11/ $10.29 versus my $12.42 / $11.25 (per share). My high EPS is less due to a lower growth rate. VL eclipses both at $15.00.

MS LSPF of $82.30 implies a Forecast Low P/E of 8.0 versus the above-stated 7.5. MS LSPF is 6.6% greater than the default $10.29/share * 7.5 = $77.18 resulting in more aggressive zoning. MS LSPF is 2.3% less than mine, however.

MOS is robust because my inputs are near or below respective analyst/historical ranges and (anecdotally) MS averages. MS TAR 6.3%/year greater than mine is also suggestive of MOS.

With regard to valuation, PEG is 8.5 and 5.4 per Zacks and my projected P/E: both significantly overvalued (only 0.14 per M* suggests some calculation disconnect). Relative Value [(current P/E) / 5-year-mean average P/E] is expensive at 1.15. On the other hand, CFRA and M* calculate undervalued by 12% and 20%, respectively.

Per U/D, EOG is a BUY under $97/share. BI TAR criterion is met [136.6 / ((13.77 / 100 ) +1 ) ^ 5] ~ $72 with a forecast high price ~$137.

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