Callon Petroleum (CPE) Valuation Update - Oct 17

[dan_s]

At the time of this post CPE was trading for $41.46.

TipRanks: "In the last 3 months, 6 ranked analysts set 12-month price targets for CPE. The average price target among the analysts is $76.67. In a report issued on October 10, Scott Hanold from RBC Capital maintained a Buy rating on Callon, with a price target of $72.00. According to TipRanks.com, Hanold is a top 25 analyst (5 Star rating) with an average return of 30.1% and a 65.6% success rate."

My valuation of CPE is $100/share. My valuation is based on 4X the Company's annualized operating cash flow for 2021 to 2023.
> CPE was the top performing stock in the Sweet 16 during 2021, so there was significant profit taking after they reported a production decline in Q1 2022.
> 2021 Results were $5.95 EPS and $15.06 operating cash flow per share.
> 1H 2022 actual results were $6.28 EPS and $13.05 operating cash flow per share.
> CPE is on track to be in the top quartile of the Sweet 16 for 2022 EPS and operating CFPS ($14.56 & $26.32 per my forecast)
> My forecast is very close to TipRanks' 2022 forecast of $14.70 EPS and $26.33 operating CFPS.

CPE is on pace to generate over $650 million of free cash flow from operations this year.

I cannot find anything to justify CPE trading at less than 2X operating cash flow.

My updated forecast model will be posted to the EPG website this afternoon.