CNX Resources currently trades at $39.24 and has been a dream stock for shareholders. It’s returned 186% since April 2021, nearly tripling the S&P 500’s 66.4% gain. The company has also beaten the index over the past six months as its stock price is up 23.4% thanks to its solid quarterly results.
Is now the time to buy CNX Resources, or should you be careful about including it in your portfolio? Get the full stock story straight from our expert analysts, it’s free.
Why Is CNX Resources Not Exciting?
Despite the momentum, we don't have much confidence in CNX Resources. Here are two reasons we avoid CNX and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
Cyclical industries such as Energy can make mediocre companies look great for a time, but a long-term view reveals which businesses can actually withstand and adapt to changing conditions. Unfortunately, CNX Resources’s 4.9% annualized revenue growth over the last five years was sluggish. This fell short of our benchmark for the energy upstream and integrated energy sector.
2. Fewer Distribution Channels than Larger Competitors
The size of the revenue base is a way to assess topline, and it tells an investor whether an Energy producer has crossed the line between being a more vulnerable commodity taker and a durable operating platform. Scaled businesses tend to produce and generate revenue from many wells, pads, takeaway routes, and geographies, not just a single field or drilling program.
CNX Resources’s $1.85 billion of revenue in the last year is pretty small for the industry, suggesting the company hasn’t hit a level of diversification where investors can sleep easy at night.
Final Judgment
CNX Resources isn’t a terrible business, but it doesn’t pass our bar. With its shares topping the market in recent months, the stock trades at 12.5× forward P/E (or $39.24 per share). While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're pretty confident there are superior stocks to buy right now. We’d recommend looking at an all-weather company that owns household favorite Taco Bell.
Stocks We Would Buy Instead of CNX Resources
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