Over the past six months, Expand Energy’s stock price fell to $98.28. Shareholders have lost 9.4% of their capital, which is disappointing considering the S&P 500 has climbed by 12.1%. This might have investors contemplating their next move.
Following the drawdown, is now the time to buy EXE? Find out in our full research report, it’s free.
Why Are We Positive on EXE?
Rebranded from Chesapeake Energy in 2024 after emerging from bankruptcy, Expand Energy (NASDAQ: EXE) produces natural gas, oil, and natural gas liquids from underground shale formations in Louisiana, Pennsylvania, Ohio, and West Virginia.
1. Skyrocketing Revenue Shows Strong Momentum
Cyclical industries such as Energy can make mediocre companies look great for a time, but a long-term view reveals which businesses can actually withstand and adapt to changing conditions. Over the last five years, Expand Energy grew its sales at an excellent 19.4% compounded annual growth rate. Its growth beat the average energy upstream and integrated energy company and shows its offerings resonate with customers.
2. Economies of Scale Give It Negotiating Leverage with Suppliers
The size of the revenue base is a way to assess topline, and it tells an investor whether an Energy producer has crossed the line between being a more vulnerable commodity taker and a durable operating platform. Scaled businesses tend to produce and generate revenue from many wells, pads, takeaway routes, and geographies, not just a single field or drilling program.
Expand Energy’s $12.66 billion of revenue in the last year is top-tier for the industry, suggesting the company has hit a level of diversification where investors can sleep easy at night.
3. EBITDA Margin Rising, Profits Up
Adjusted EBITDA margin strips out accounting distortions tied to depletion and historical drilling spend, providing a clearer view of the cash-generating power of the underlying asset base before financing and reinvestment decisions.
Looking at the trend in its profitability, Expand Energy’s EBITDA margin rose by 24.8 percentage points over the last year, as its sales growth gave it immense operating leverage. Its EBITDA margin for the trailing 12 months was 52.1%.
Final Judgment
These are just a few reasons Expand Energy is a high-quality business worth owning. With the recent decline, the stock trades at 12.1× forward P/E (or $98.28 per share). Is now a good time to initiate a position? See for yourself in our in-depth research report, it’s free.
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