EOG RESOURCES INC (NYSE:EOG) - A Strong Contender for GARP Investors

EOG RESOURCES INC (NYSE:EOG) stands out as a potential candidate for long-term investors seeking growth at a reasonable price (GARP). The company, an independent oil and gas producer, meets key criteria from Peter Lynch’s investment strategy, combining solid profitability, financial health, and sustainable growth with an attractive valuation.

Why EOG Fits the GARP Approach

• Earnings Growth: EOG has delivered a 5-year average EPS growth of 18.45%, comfortably within Lynch’s preferred range of 15-30%. This indicates steady, sustainable expansion rather than overheated growth.
• Reasonable Valuation: With a PEG ratio of 0.54 (well below Lynch’s threshold of 1), the stock appears undervalued relative to its earnings growth. The P/E ratio of 9.99 further supports this, trading below both industry and S&P 500 averages.
• Strong Profitability: The company’s return on equity (ROE) of 20.59% exceeds Lynch’s 15% benchmark, reflecting efficient use of shareholder capital. Margins are also robust, with a 26.13% profit margin outperforming most peers.
• Financial Health: EOG maintains a conservative balance sheet, with a debt-to-equity ratio of 0.12—far below Lynch’s 0.6 limit. Liquidity is sound, with a current ratio of 1.87.

Fundamental Snapshot

EOG’s fundamental report highlights its strengths:

• Profitability: Scores 7/10, with high ROE and improving margins.
• Health: Scores 8/10, backed by low debt and strong solvency metrics.
• Valuation: Scores 6/10, trading at a discount to peers despite solid fundamentals.
• Dividend: Offers a 3.45% yield with a sustainable payout ratio, though future growth may slow.

While growth expectations are modest (1.03% annual EPS growth projected), EOG’s disciplined capital allocation and focus on high-return projects position it well for long-term investors.

For more stocks matching the Peter Lynch strategy, explore our screener.

Disclaimer

This is not investing advice! The article highlights observations at the time of writing, but you should always conduct your own analysis before making investment decisions.