Vital Energy (VTLE) Valuation Update - May 10

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dan_s
Posts: 32125
Joined: Fri Apr 23, 2010 8:22 am

Vital Energy (VTLE) Valuation Update - May 10

Post by dan_s »

I have updated my forecast/valuation model for Q1 results that beat my forecast and the company's updated guidance.
The Driftwood Acquisition that closed on April 3, 2023 adds ~5,400 Boepd of production (~63% oil) and lots of running room.

My current valuation increases by $6 to $114 per share.

VTLE closed on May 10 at $42.38.

TipRanks: "In the last 3 months, 5 ranked analysts set 12-month price targets for VTLE. The average price target among the analysts is $72.80. The five price targets range from $53 to $110 per share."

On a per share basis VTLE was the most profitable company in the Sweet 16 in 2022 ($37.67 EPS) and it is on-track to repeat that again in 2023.
My 2023 forecast is Net Income per share of $21.51 and Operating Cash Flow per share of $42.83.
TipRanks consensus forecast for 2023 is Net Income per share of $22.37 and Operating Cash Flow per share of $44.04.
There is nothing that justifies this stock trading at less than 1X CFPS.

My valuation of $114 is just 2.5 X annualized operating cash flow per share. < Very conservative multiple for a company that is free cash flow positive with this much running room.

Vital has a very low number of shares outstanding (~18.6 million after the Driftwood Acquisition), which is why per share numbers are so high. Some funds will not invest in companies with low share counts. I love them.

In my opinion, VTLE is a "Screaming Takeover Target".
Dan Steffens
Energy Prospectus Group
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