Time To Buy Continental Resources, Inc. (NYSE: CLR)?
Shares of Continental Resources, Inc. (NYSE: CLR) are receiving a lot of investor interest as of late due to the stock's 19.1% increase over the last month. Shareholders are now asking themselves whether the company's current stock price is reflective of its true value or if shares have even further upside from here.
Let's take a look at Continental's value and outlook based on its most recent financial data to see if there are any catalysts for a price change.
Is Continental Still Cheap?
Good news, value investors! Continental is still a bargain right now. According to the valuation below, the intrinsic value for the stock is $72.52, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low.
| Analysis | Model Fair Value | Upside (Downside) |
|---|---|---|
| 10-yr DCF Revenue Exit | $86.85 | 50.5% |
| 5-yr DCF Revenue Exit | $86.48 | 49.9% |
| Peer EBITDA Multiples | $45.35 | -21.4% |
| 10-yr DCF Growth Exit | $87.01 | 50.8% |
| 5-yr DCF Growth Exit | $86.69 | 50.2% |
| Peer P/E Multiples | $42.77 | -25.9% |
| Average | $72.52 | 25.7% |
Click on any of the analyses above to view the latest model with real-time data.
What’s more interesting is that Continental’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What Does The Future Of Continental Look Like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations.
source: finbox.io data explorer
With EBITDA expected to grow on average of 25.8% over the next couple years, the future certainly appears bright for Continental. It looks like higher cash flows are in the cards for shareholders, which should feed into a higher share valuation.
How This Impacts You
Many investors separate stocks into value and growth categories based on quantitative metrics. However, one of the most famous investors in the world views this as foolish. In Warren Buffett's 1992 letter to Berkshire Hathaway shareholders, Buffett touches upon a subject at odds with much of the investment industry:
"Most analysts feel they must choose between two approaches customarily thought to be in opposition: 'value' and 'growth.' Indeed, many investment professionals see any mixing of the two terms as a form of intellectual cross-dressing. We view that as fuzzy thinking… In our opinion, the two approaches are joined at the hip: Growth is always a component in the calculation of value."
While investors tend to categorize stocks into value and growth, some of the most successful investors view growth as simply one component of a company's value.
Continental's optimistic future growth does not appear to have been fully factored into the current share price with the stock still trading below its intrinsic value. Therefore, it may be a good time to purchase shares or increase your position in the company.
But before making an investment decision, I recommend you continue to research Continental to get a more comprehensive view of the company by looking at:
Valuation Metrics: how much upside do shares of Continental have based on Wall Street's consensus price target? Take a look at our analyst upside data explorer that compares the company's upside relative to its peers.
Forecast Metrics: what is Continental's projected EBITDA margin? Is the company expected to improve its profitability going forward? Analyze the company's projected EBITDA margin here.
Efficiency Metrics: how much free cash flow does Continental generate as a percentage of total sales? Has it been increasing or decreasing over time? Review the firm's free cash flow margin here.
Author: Andy Pai
Expertise: financial modeling, mergers & acquisitions
Andy is also a founder at finbox.io, where he's focused on building tools that make it faster and easier for investors to do investment research. Andy's background is in investment banking where he led the analysis on over 50 board advisory engagements involving mergers and acquisitions, fairness opinions and solvency opinions. Some of his board advisory highlights:
- Sears Holdings Corp.'s $620 mm spin-off via rights offering of Sears Outlet, Hometown Stores and Sears Hardware Stores.
- Cerberus Capital Management's $3.3 bn acquisition of SUPERVALU Inc.'s New Albertsons, Inc. assets.
Andy can be reached at andy@finbox.io.
As of this writing, I did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.