Chen energy (LNG – Free Report) was recently named to Zacks.com’s list of Most Searched Stocks. Therefore, you should consider some of the key factors that could influence the stock’s performance in the near future.
Shares in this natural gas company have returned -4.8% over the past month, while the Zacks S&P 500 Composite is up +7.5%. The Zacks Oil and Gas – Exploration and Production – United States industry, which includes Cheniere Energy, is up 7.9% over the period. The key question now is: Where could the stock head in the short term?
While news releases or rumors of a material change in a company’s business prospects will usually “trend” the stock and result in an immediate price change, there are always some basic facts that ultimately drive the buy-and-hold decision.
Revisions to earnings estimates
Here at Zacks, we prioritize evaluating the change in forecasting a company’s future earnings over anything else. That’s because we believe the present value of its future earnings streams determines the fair value of its stock.
Essentially, we look at how sell-side analysts who cover the stock are revising their earnings estimates to reflect the impact of recent business trends. And when earnings estimates for a company go up, the fair value of its stock goes up. A higher fair value than the current market price attracts investors to buy the stock, causing the price to rise. For this reason, empirical research shows a strong correlation between trends in earnings estimate revisions and short-term stock price movements.
Cheniere Energy is expected to report earnings of $4.59 per share for the current quarter, a +492.3% year-over-year change. In the last 30 days, the Zacks consensus estimate has changed by -2.3%.
For the year-to-date, the consensus earnings estimate of $5.31 points to a +157.4% year-on-year change. In the last 30 days, this estimate has changed by -42.2%.
For the next fiscal year, the consensus earnings estimate of $18.90 shows a change of +255.9% from what Cheniere Energy is expected to report a year ago. Over the past month, the estimate has changed by +14.7%.
With an impressive, third-party audited track record, our proprietary stock ranking tool – the Zacks Rank – is a more meaningful indicator of a stock’s short-term price performance because it effectively harnesses the power of earnings estimate revisions. The size of the recent consensus estimate change, along with three other factors related to earnings estimates, has resulted in a Zacks #2 rank (Buy) for Cheniere Energy.
The chart below shows the development of the company’s 12-month consensus EPS estimate:
12 Month EPS
Projected sales growth
While a company’s earnings growth is arguably the best indicator of its financial health, not much happens if it can’t grow its revenue. It’s almost impossible for a company to grow its profits without increasing its revenue over long periods of time. Therefore, knowing a company’s potential revenue growth is crucial.
For Cheniere Energy, the consensus revenue estimate for the current quarter of $8.33 billion indicates a +27% year-over-year change. For the current and next fiscal year, estimates of USD 32.24 billion and USD 27.39 billion indicate changes of +103.2% and -15.1%, respectively.
Latest reported results and surprise history
Cheniere Energy reported revenue of $8.85 billion for the most recent quarter, a +176.6% year-over-year change. EPS of $7.80 for the same period compared to $0.94 a year ago.
Compared to the Zacks Consensus estimate of $8.04 billion, reported earnings represent a surprise of +10.11%. EPS surprise was +42.86%.
In the past four quarters, Cheniere Energy has beaten consensus estimates for earnings per share three times. The company beat consensus sales estimates every time during this period.
No investment decision can be efficient without considering a stock’s valuation. When predicting the future price development of a stock, it is crucial to determine whether its current price accurately reflects the intrinsic value of the underlying business and the company’s growth prospects.
Comparing the current value of a company’s valuation multiples, such as B. Price to Earnings (P/E), Price to Sales (P/S), and Price to Cash Flow (P/CF), with its own historical values help determine whether the stock is Fairly Valued, Overvalued or Undervalued while making the comparison of the company relative to its peers based on these parameters gives a good indication of how reasonable the stock price is.
The Zacks Value Style Score (part of the Zacks Style Scores system), which pays close attention to both traditional and unconventional valuation metrics to rank stocks from A to F (an An is better than a B; a B is better than a C; etc.) is quite helpful in determining whether a stock is overvalued, correctly valued, or temporarily undervalued.
Cheniere Energy is rated B on this front, indicating it is trading at a discount to its peers. Click here to view the values of some of the assessment metrics that led to this grade.
The facts discussed here and plenty of other information on Zacks.com could help determine whether or not the market hype surrounding Cheniere Energy is worth paying attention to. However, its No. 2 Zacks rank suggests it could outperform the broader market in the near term.