Photo by Jakub Żerdzicki on Unsplash
 

As part of our ongoing series at The Acquirer’s Multiple, each week we spotlight a stock from our Stock Screeners that might be a deeply undervalued gem hiding in plain sight. This week’s spotlight is APA Corporation (APA) — a global oil & gas producer with large-scale upstream assets spanning the U.S., Egypt, and the North Sea, supported by disciplined capital allocation and a long history of converting commodity cycles into durable free cash flow.
 

Business Overview

APA is a diversified exploration and production company with a balanced portfolio of crude oil, natural gas, and NGL assets across multiple geographies. The company’s strategy centers on efficient exploration, tight opex control, and reinvesting cash flow at high-return drilling locations.

APA’s production mix, global asset footprint, and flexible capital program allow it to rapidly adjust to commodity prices. Even in volatile markets, APA consistently generates meaningful free cash flow, maintains lean operations, and returns capital through buybacks and dividends.
 

What Is IV/P (Intrinsic Value to Price)?

IV/P tells you whether a stock offers more intrinsic value than the price you’re paying. The ratio blends earnings power, reinvestment efficiency, and capital-return policy to estimate a conservative measure of worth.

IV/P > 1 → Undervalued
IV/P < 1 → Overvalued

APA’s IV/P = 1.20, meaning intrinsic value is estimated to be ~20% higher than the current market price — a positive but more moderate signal of undervaluation relative to peers.
 

Supporting Metrics

APA’s AM of 4.8 places it deep in value territory — one of the lowest AM readings among mid-cap E&Ps today. The market is pricing APA as though long-term profitability will remain structurally impaired, despite continued strong cash generation.
 

Revenue & Profitability

APA remains solidly profitable, with operating margins that outperform many integrated and independent producers. Despite lower commodity prices vs. prior years, APA continues to deliver strong earnings and robust free cash flow.
 

Balance Sheet Strength

APA carries meaningful leverage, but this is typical for upstream operators with long-lived, cash-flowing assets. Liquidity is adequate, FCF is strong, and the balance sheet supports ongoing development and shareholder returns.
 

Capital Returns

APA maintains a balanced approach: a modest dividend plus opportunistic buybacks during periods of undervaluation. With an IV/P of 1.20, repurchases still enhance per-share value, although the margin of safety is less extreme than in higher IV/P cases.
 

Why APA Might Be Undervalued

Several factors point toward a mispricing:

• The market is still pricing APA for structurally weak long-term commodity prices.
• Despite cyclicality, APA continues to produce nearly US$ 2B of annual FCF.
• Operating margins remain robust due to disciplined cost management.
• APA’s diversified global footprint provides resilience through commodity cycles.
• An IV/P of 1.20 signals a meaningful, though more moderate, discount to intrinsic value.
• An Acquirer’s Multiple of 4.8 is extremely attractive for a business with APA’s cash generation, placing it in classic deep-value territory.
   

Conclusion

With an IV/P of 1.20, a very attractive Acquirer’s Multiple of 4.80, and nearly US$ 2B of annual free cash flow, APA Corporation screens as a compelling discounted opportunity in the energy sector. Its diversified asset base, strong profitability, and disciplined capital program provide multiple avenues for long-term value creation.

For value investors seeking a cash-generative operator trading at a solid discount to intrinsic value, APA may represent a durable and mispriced opportunity within energy.

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