Valuation Scorecard: Stock Rating C-High Neutral (2/27/24)-Range Resources Corp. (RRC).

What is the market’s view of Range Resources’ future operating performance as reflected in the current price of $33? Range Resources’ common shares will need to reach $55 to achieve average annual stock market performance of 9.0% over the next 6 years. Upper quartile performance will require a $65 Range Resources stock price by 2028.

Executive Summary

• Key Range Resources characteristics: very high profitability, high expected growth, high financial strength, and low stability. A big positive influence on Range Resources’ valuation is its superior Profitability.
• Very high valuation, above market shareholder returns. Current valuation levels are very high relative to the Range Resources Peer Group. Recent market returns have outperformed the Range Resources Peer Group. Total shareholder returns expected to significantly beat the overall equity market. Based on current investor expectations, Range Resources shares should reach a level of $231 by 2028 — an 39.3% per year total shareholder return. A 2028 stock price of $55 would reflect median performance and a price of $65 would be required to reach upper quartile performance.
• Range Resources’ historical growth is very high. Historical growth has been very high relative to the Range Resources Peer Group and forecasted growth is relatively very high. Equity Growth, and EPS Growth have been superior. These factors have buoyed market perceptions of Range Resources. Range Resources’ historical income statement growth and balance sheet growth have diverged. Revenue growth has exceeded asset growth; earnings growth has paralleled equity growth and return on equity has been stable. Range Resources’ consensus growth expectations are lower than historical growth.
• Profitability has been Range Resources’ biggest valuation strength. Return on Equity, Asset Turnover, Pretax ROA, and Pretax Margin are all group leading. These factors have strengthened market perceptions of Range Resources. The company has very high excess cash and will have to work to reinvest at attractive returns to support profitability and valuation.
• Range Resources’ risk profile is favorable. Overall variability has been only average with only average revenue variability, only average E.P.S. variability, and very high stock price volatility. Financial Strength is relatively high and earnings’ expectations are very low. The debt/capital ratio has declined very significantly.

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