Vital Energy (VTLE) Valuation Update - Nov 7

[dan_s]

At the time of this post VTLE was trading for $30.62, up 5.3% today.

I have updated my forecast model for Q3 results that beat my forecast and their increased production guidance.
The current share price is just 38% of book value per share based on their 9-30-2024 audited financial statements. < Cannot see anything that justifies this stock trading at such a discount to Book Value.

Q3 results were $5.64 Net Income per share and $7.22 operating CFPS.

In my updated model I made the effort to be overly conservative on each line item.
Here is how my forecast compares to TipRanks' consensus 2024 forecast:
My Revenues of $1,950 million to $1,942 million (only three of the ten analsyst have updated their models for the strong Q3 results)
My Net Income per share of $6.45 to TipRanks' $6.90
My Operating CFPS of $28.07 to TipRanks' $28.59

My current stock valuation adjusts to $83, down from $92 because I dropped 2023 CFPS of $43.67 from the valuation. I am just using annualized operating cash for 2024 + 2025 times 3, which is the most conservative multiple in the Sweet 16.

TipRanks: "In the last 3 months, 10 ranked analysts set 12-month price targets for VTLE. The average price target among the analysts is $37.38. The ten price targets range from $29 to $66" Only three analysts have updated their price targets this morning to $37, $58 and $66 (Truist Financial).

Vital Energy is a pure play on the Permian Basin with current production of ~140,000 Boepd. < 48.5% crude oil.
> Strong production growth of 17.1% year-over-year in 2023 and on pace for 37% year-over-year in 2024.
> My 2025 forecast assumes YOY production growth will be 10%, which is super conservative base on their 2024 well results & guidance.
> Vital should finish 2024 with free cash flow of over $200 million.
> No near-term debt issues.
> Decent amount of Running Room in the Permian Basin (See Slide 7 in Q3 presentation).
> So far, they have not paid dividends, which the Wall Street Gang does not like. < The only negative that I see.

Bottomline: Vital is a Screaming Takeover Target at the current share price. A profitable company with this level of production and running room should not be trading for less than book value.