APA Corporation has followed the market’s trajectory closely, rising in tandem with the S&P 500 over the past six months. The stock has climbed by 15.1% to $44.91 per share while the index has gained 16.4%.
Is APA a buy right now? Find out in our full research report, it’s free.
Why Are We Positive on APA Corporation?
Operating in three continents with a history stretching back to 1954, APA Corporation (NASDAQ: APA) explores for, develops, and produces crude oil, natural gas, and natural gas liquids in the U.S., Egypt, and the U.K. North Sea.
1. Long-Term Revenue Growth Disappoints
A company’s long-term performance can give signals about its business quality. Even a bad business, especially in a cyclical industry, can shine for a year or so, but a top-tier one should exhibit resilience through cycles. Unfortunately, APA Corporation’s 9.6% annualized revenue growth over the last five years was mediocre. This wasn’t a great result compared to the rest of the energy upstream and integrated energy sector, but there are still things to like about APA Corporation.
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.
APA Corporation’s $8.37 billion of revenue in the last year is top-tier for the industry, suggesting the type of diversification that reduces operational risk.
3. Elite Gross Margin Powers Best-In-Class Business Model
While energy gross margins can be distorted by commodity prices, hedging, and short-term cost swings, sustained margins across a full cycle reflect a producer’s underlying asset quality, infrastructure position, and cost structure.
APA Corporation, which averaged 67.8% gross margin over the last five years, exhibits enviable unit economics in the sector. It means the company will remain profitable at lower commodity prices than peers with inferior gross margins and serves as an advantaged starting point for ultimate operating profits and free cash flow generation.
Final Judgment
These are just a few reasons why we think APA Corporation is a great business. At $44.91 per share (or 9.1× forward P/E), is now the right time to buy the stock? See for yourself in our full research report, it’s free.
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