APA Corporation (APA)

Conclusion

APA Corporation is an independent energy company that explores for, develops and produces natural gas, crude oil and natural gas liquids, with operations in the United States, Egypt and the North Sea and exploration in Suriname. At a price of 44.55 USD on 2026-11-09, the market capitalisation is 15.15 billion USD and the enterprise value is 18.37 billion USD.

The verdict is undervalued. The price-to-earnings ratio is 6.98 against a ten-year median of 9.09, and the enterprise value to EBITDA is 2.93 against 5.18. The discounted cash flow gives 103.72 USD per share, and the fair value from historical multiples is 58.01 USD. The fair value band runs from 64.69 to 97.04 USD with a midpoint of 80.86 USD, a margin of safety of 81.5% at the current price. The reverse DCF implies growth of -8.3% a year, while revenue actually grew at a five-year CAGR of 15.0% but fell at a three-year CAGR of -7.0%.

What holds the case up is a return on invested capital of 25.1% against a WACC of 8.1%, free cash flow conversion of 96.3% on a trailing basis, and net debt to EBITDA of 0.51. What would break it is earnings: the three-year EPS CAGR is -28.7%, the next-year EPS growth estimate is -21.2%, and the current ratio is 0.85.

Financial health

Financial strength is green, held up by net debt to EBITDA of 0.51, interest coverage of 17.6 and debt to equity of 0.46 as of 2026-09-30. The current ratio of 0.85 and quick ratio of 0.62 are weaker and are the figures to watch. The Altman Z-score is 2.25, in the grey zone, but the Altman model was designed for manufacturers and APA is an oil and gas producer, so this reading is only indicative. Insolvency risk: low, about 0.5% by the estimate of the Ohlson model over one to two years, based on figures as of 2025-12-31.

Earnings quality

Earnings quality is yellow. Cash conversion and a shrinking share count support it, while the Piotroski score and the missing Beneish reading weigh on it. Free cash flow conversion is 96.3% on a trailing basis and 83.3% over five years, and free cash flow after stock-based compensation is 2.09 billion USD. The accrual ratio is -0.16 for 2025. The company does not report its stock-based compensation, so that ratio to revenue is not available. The five-year change in share count is -1.0% a year, which reflects buybacks. The Piotroski score is 5 of 9, and the Beneish M-score is not available. APA beat earnings expectations in 7 of the last 8 quarters, with an average surprise of 44.5%. Estimate revisions have risen: current-year estimates are up 26.4% over 90 days and next-year estimates up 31.7%.

Profitability

Profitability is green. The gross margin of 48.3% compares with a ten-year median of 40.1%, the operating margin of 43.8% with 28.8%, and the net margin of 22.9% with 11.2%. Operating margin stability is 0.68. ROIC of 25.1% against a WACC of 8.1% gives a ROIC minus WACC of 17.0%, and the five-year ROIC median is 26.2%. Return on equity of 30.2% is helped by leverage: the DuPont split for 2025 shows a net margin of 16.1%, an asset turnover of 0.47 and an equity multiplier of 3.12. Returns on the operating base, not the equity multiplier, are what carry the case.

Growth

Growth is red. Revenue compound growth is -7.0% over three years, 15.0% over five years and 3.4% over ten years. Revenue grew in 5 of the 10 comparable years. EPS has fallen at a three-year CAGR of -28.7%, and free cash flow per share at -13.5% over three years, though it rose at 85.2% over five years. The next-year EPS growth estimate is -21.2%, so the earnings trend is expected to keep falling rather than recover.

Valuation

Valuation is green, held up by the undervalued verdict and a margin of safety of 81.5%. Today's price-to-earnings ratio of 6.98 is a premium of -23.2% to its ten-year median of 9.09, enterprise value to EBITDA of 2.93 is -43.3% against 5.18, and price to free cash flow of 7.25 is -23.7% against 9.50. Price to sales of 1.60 is +10.2% against 1.45, and price to book of 2.11 is -6.4% against 2.25. The discounted cash flow gives 103.72 USD per share at a discount rate of 8.9%, with 55.2% of its value in the terminal period. The fair value from historical multiples is 58.01 USD. The reverse DCF implies growth of -8.3%, against five-year revenue growth of 15.0%. The fair value is an order of magnitude built on fixed assumptions, not a price target. The dividend yield is 2.3% and the payout on free cash flow is 16.9%.

Risks

The main risk is earnings. A three-year EPS decline of -28.7% and a next-year estimate of -21.2% would reduce cash available for the dividend and buybacks, and would weaken the case for the low multiples. The current ratio of 0.85 and quick ratio of 0.62 mean short-term obligations depend on cash flow staying steady. The Altman Z-score of 2.25 in the grey zone adds to this concern, although the Ohlson estimate of insolvency risk is low. The DCF rests on a terminal share of 55.2%, so a change in long-term assumptions would move the value materially. The Beneish M-score and the stock-based compensation ratio are not available. This analysis has no debt maturity schedule and no revenue by segment, so it cannot test how debt repayments or individual regions would affect the figures above.