Expand Energy Corporation (EXE)

Conclusion

Expand Energy Corporation is an independent US natural gas producer with acreage in the Marcellus, Utica and Haynesville shales. At 85.96 USD on 2026-11-09, its market capitalisation is 19.85 billion USD.

The verdict is undervalued. Enterprise value to EBITDA is 3.72 against a historical median of 2.74, a premium of 35.8%, while price to free cash flow is 8.09 against a median of 13.01, a discount of 37.8%. The discounted cash flow gives 144.98 USD per share at a discount rate of 8.9%, and the fair value from historical multiples is 99.52 USD. The fair value band runs from 97.80 to 146.70 USD with a midpoint of 122.25 USD, a margin of safety of 42.2% at the current price. The reverse discounted cash flow implies revenue growth of -6.5% a year, against revenue growth of 17.5% a year over the last five years.

The strongest numbers are return on invested capital of 11.97% against a cost of capital of 7.95%, net debt to EBITDA of 0.69, and free cash flow conversion of 89.2% over the last twelve months. The weakest are five-year free cash flow conversion of 38.9%, a five-year compound increase in the share count of 89.8%, and a next-year earnings per share estimate that falls 7.0% with more downward than upward revisions. If the share count keeps rising at that pace or the earnings estimates keep falling, the discount to the fair value band would be harder to justify.

Financial health

The colour is green, held up by a net debt to EBITDA of 0.69 and interest coverage of 17.6, both assessed good, with a debt to equity ratio of 0.24. The current ratio of 0.90 and quick ratio of 0.44 are weaker, and the current ratio is flagged as a watch item. The Altman Z-score is 2.28, in the grey zone; the model was designed for manufacturers, so it is only a rough guide for an energy producer. Insolvency risk: low, about 0.04% by the estimate of the Ohlson model over one to two years. Together these figures point to a balance sheet that can absorb a weak gas price year, though liquidity is thin.

Earnings quality

The colour is red, pulled down by weak cash conversion and a rising share count, while the Piotroski score of 8 out of 9 is a clear positive. Free cash flow conversion is 89.2% over the last twelve months but only 38.9% on a five-year basis. The accrual ratio of -0.098 shows earnings backed by cash. Stock-based compensation is 0.3% of revenue, and free cash flow after it is 2.41 billion USD. The share count has compounded upward by 89.8% a year over five years, so there have been no buybacks. The Beneish M-score is not available. The company beat earnings estimates in seven of the last eight quarters, with an average surprise of 10.8%, but estimates for the next year have been cut by 9.8% over ninety days.

Profitability

The colour is green. Gross margin is 63.5%, operating margin 24.8% and net margin 20.1%, all well above their historical medians of 19.8%, 1.7% and -0.7%. Operating margin has been stable, with a stability value of 4.97. The most important figure is return on invested capital of 11.97% against a cost of capital of 7.95%, a return above the cost of capital of 4.02%. However, the five-year median return on invested capital is 21.86%, so returns have fallen from their earlier level. Return on equity is 14.1%. The DuPont split from the 2025 annual figures shows a net margin of 15.6%, an asset turnover of 0.41 and an equity multiplier of 1.52, so leverage contributes only modestly to that return.

Growth

The colour is red. Revenue compounded at 0.6% over three years, 17.5% over five years and -0.9% over ten years. Revenue grew in five of the last ten comparable years. Earnings per share fell at a compound rate of 39.3% over three years, and free cash flow per share fell 21.4% over the same period, although it rose 27.7% a year over five years. The next-year earnings estimate points to a further decline of 7.0%. The record shows strong growth in the mid-cycle but no steady trend, and the recent three-year figures are weak.

Valuation

The colour is green, because the verdict is assessed as undervalued with a margin of safety of 42.2%. Enterprise value to EBITDA of 3.72 is a 35.8% premium to its historical median of 2.74, while price to free cash flow of 8.09 is a 37.8% discount to its median of 13.01, price to book of 1.02 a 20.2% discount to 1.28, and price to sales of 1.45 a 5.9% discount to 1.54. The discounted cash flow gives 144.98 USD per share with a discount rate of 8.9%, and about 53% of that value sits in the terminal value. The fair value band is 97.80 to 146.70 USD, built on fixed assumptions rather than a price target. The reverse discounted cash flow implies growth of -6.5% against five-year revenue growth of 17.5%. The dividend yield is 2.8%, with a payout of 22.3% of free cash flow.

Risks

The main risk is a fall in free cash flow. With the five-year conversion at 38.9%, a weaker gas price could quickly shrink the cash that supports both the dividend and the debt. The share count has grown by 89.8% a year over five years, so per-share value could keep falling even if total earnings hold. Falling earnings estimates, with a next-year decline of 7.0%, would weaken the case for the current multiples. Low liquidity, with a current ratio of 0.90, leaves little room for a shock. The Altman model is not designed for an energy producer, so its grey-zone reading is only indicative. The Beneish M-score is not available. This analysis has no debt maturity schedule and no revenue split by segment, so it cannot show when debt falls due or which basins drive the results.