Thinking about what to do with Equinor stock? You are not alone. With energy markets always on the move and global trends reshaping the oil and gas sector, plenty of investors are wondering if now is the moment to buy, hold, or move on. In 2024, Equinor’s share price has bounced around a bit, up 0.9% in the past week, though still down 13.3% year-to-date and 3.6% over the past month. That said, stepping back reveals a bigger story. Over the last five years, Equinor has delivered a strong 142.3% return, suggesting periods of volatility might just be part of the ride for patient investors.

Some of these recent shifts reflect broader market developments, such as changing oil prices and new policies around global energy security. At the same time, Equinor’s track record hints at underlying growth potential, even as the market adjusts its risk lens from time to time. But beyond just price movements, it makes sense to ask: is Equinor undervalued right now? The short answer is, probably. By most measures, the company scores a 5 out of 6 on our valuation checklist, suggesting it clears almost every bar for being attractively priced.

But how do we know if that score truly means value is on the table, or if there is a catch? Let’s dig into those valuation methods and see what really stands out. And stick around. At the end, I will share a perspective that goes beyond checklists for a fuller picture of what Equinor might be worth.

Why Equinor is lagging behind its peers

A Discounted Cash Flow (DCF) model estimates a company’s intrinsic value by projecting its future free cash flows and discounting them back to today’s value, using an appropriate risk-adjusted rate. This helps investors understand what the business is really worth right now, based on its ability to generate cash in the future.

For Equinor, the DCF model uses a two-stage Free Cash Flow to Equity approach. The company’s latest twelve-month Free Cash Flow stands at $10.17 billion. Analysts supply direct estimates for the next several years, showing projected growth from $4.5 billion in 2026 up to $8.16 billion by 2029. From 2030 onward, Simply Wall St extrapolates further increases, with 2035’s projected Free Cash Flow reaching $12.63 billion.

When these future cash flows are discounted back to today, the model arrives at an intrinsic value of $846.07 per share. Compared to the current price, this implies Equinor is trading at a steep 71.5% discount. This signals the stock is substantially undervalued by this metric.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Equinor.

Our Discounted Cash Flow (DCF) analysis suggests Equinor is undervalued by 71.5%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

The Price-to-Earnings (PE) ratio is a widely used valuation method for analyzing profitable companies like Equinor, because it ties the company’s share price directly to its actual earnings. For investors, the PE ratio offers an at-a-glance gauge of how much the market is willing to pay for each dollar of profits, making it a common yardstick for comparing companies both within and across industries.

It is important to remember that “normal” or “fair” PE ratios are influenced by factors like growth prospects and risk. Fast-growing companies or those with lower risk generally command higher PE multiples, while companies facing challenges may trade at lower multiples.

Currently, Equinor trades on a PE ratio of 7.5x. That is notably below both the peer average of 15.2x and the Oil and Gas industry average of 12.5x. At first glance, this may suggest the stock is undervalued compared to similar businesses.

However, Simply Wall St offers a proprietary “Fair Ratio” for Equinor, which is 8.5x. This figure goes a step further than basic peer or industry averages by factoring in things like Equinor’s specific earnings growth expectations, profit margins, company size, and unique risk profile. As a result, the Fair Ratio provides a more holistic valuation benchmark that is tailored specifically to Equinor’s situation.

With Equinor’s current 7.5x PE ratio sitting below both its Fair Ratio (8.5x) and general benchmarks, the data suggests the stock is undervalued on this metric as well.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Earlier, we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is a simple and powerful tool that allows you to create a story behind the numbers with your own perspective on Equinor’s outlook, applying your assumptions about future revenue, earnings, and margins. All of this is linked to a fair value you believe is realistic.

On Simply Wall St’s Community page, millions of investors use Narratives to connect the company’s strategy, industry changes, and their expectations into a forecast. This helps them see what Equinor is truly worth. Narratives make it easy to compare your fair value to the current share price, so you can decide when it might be time to buy, hold, or sell. They also update automatically as news breaks or earnings are released, ensuring your investment view is always current.

For example, among Equinor investors, some are optimistic and set their fair value as high as NOK320.92, believing Europe’s energy security and major new discoveries will drive growth. Others are more cautious, assigning a value as low as NOK179.69 due to concerns about declining oil revenues and challenges in renewables. With Narratives, you can clearly see, share, and refine your own investment story as real-world events unfold.

Do you think there's more to the story for Equinor? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Companies discussed in this article include EQNR.ob.

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