EQUINOR ASA-SPON ADR (NYSE:EQNR) – A GARP Candidate in the Energy Sector

EQUINOR ASA-SPON ADR (NYSE:EQNR) was identified by our Peter Lynch-inspired stock screener as a potential candidate for long-term growth at a reasonable price (GARP) investors. The company, a key player in the oil, gas, and renewable energy sectors, meets several criteria that align with Lynch’s investment philosophy. Below, we examine why EQNR stands out.

Key Strengths

• Earnings Growth: EQNR has delivered a 5-year average EPS growth of 16.8%, fitting within Lynch’s preferred range of 15-30%. This suggests sustainable, but not excessive, growth.
• Attractive Valuation: The stock’s PEG ratio (0.57) is well below 1, indicating it is reasonably priced relative to its growth. The P/E ratio of 9.55 is also below industry and S&P 500 averages.
• Strong Profitability: With a Return on Equity (ROE) of 19.1%, EQNR outperforms 83% of its peers in the oil and gas sector. Its Return on Invested Capital (ROIC) of 24.3% further highlights efficient capital allocation.
• Healthy Balance Sheet: The company maintains a Debt/Equity ratio of 0.5, below Lynch’s preferred threshold of 0.6. Its current ratio of 1.37 indicates solid liquidity.
• Dividend Appeal: EQNR offers a 5.6% dividend yield, supported by a track record of consistent payouts and dividend growth.

Considerations

While EQNR scores well on profitability and valuation, its recent earnings growth has slowed, and revenue is expected to decline slightly in the near term. Additionally, the high dividend payout ratio (89%) could limit future increases unless earnings improve.

Fundamental Summary

Our full fundamental analysis rates EQNR a 6 out of 10, with strong profitability and reasonable valuation offsetting some concerns about growth and dividend sustainability.

For investors seeking a balanced mix of growth and value in the energy sector, EQNR presents an interesting opportunity.

Our Peter Lynch Strategy screener provides more stocks that fit this strategy and is updated regularly.

Disclaimer

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