As part of our ongoing series here at The Acquirer’s Multiple, each week we focus on one of the stocks from our Stock Screeners, and why it might be a deeply undervalued gem.
The stock this week is:
GeoPark Ltd (GPRK)
GeoPark Ltd is a Latin American oil and gas exploration and production company with operations concentrated in Colombia, Ecuador, Chile, Brazil, and Argentina. The firm focuses on low-cost, high-return hydrocarbon projects and has developed a reputation for disciplined capital allocation and consistent shareholder returns. While relatively under-the-radar compared to major global producers, GeoPark offers compelling fundamentals for value-focused investors.
One of the metrics we use in our screens is IV/P (Intrinsic Value to Price). Let us simplify what it means:
What is IV/P (Intrinsic Value to Price)?
IV/P tells you if a stock is a good deal based on how much value you’re getting for the price you pay.
The Calculation:
It combines a stock’s earning power, growth potential, and what it’s returning to shareholders (via dividends and buybacks) to calculate its Implied Value — what the business is worth based on its fundamentals.
The Interpretation:
- IV/P > 1: You’re getting more value than you’re paying for — a potential bargain.
- IV/P < 1: You’re paying more than the business is worth — possibly overvalued.
If IV/P is very high, it signals the stock might be trading at a deep discount.
IV/P for GeoPark: 5.10
GeoPark currently has an IV/P of 5.10, meaning the stock’s implied value is calculated to be 5.1 times greater than its current price. Put another way:
For every $1 you invest, you’re potentially getting $5.10 of value.
That’s a remarkably high margin of safety, suggesting GeoPark may be significantly undervalued.
Supporting Metrics:
- Shareholder Yield: 21.18%
(A combination of dividends and buybacks — strong return of capital to investors.) - Free Cash Flow Yield: 72.40%
(Exceptionally high FCF yield, indicating the company generates a large amount of free cash relative to its market cap.) - Return on Assets (5Yr Avg): 23.66%
(Demonstrates efficiency and profitability in utilizing assets.)
Why Might GeoPark Be Undervalued?
- Regional Exposure:
As a Latin American producer, GeoPark may be overlooked by mainstream U.S. investors due to geographic focus, political risk perceptions, and low analyst coverage. - Smaller Market Cap:
With a market cap under $400 million, GeoPark operates well below the radar of many institutional investors, which can create mispricing opportunities. - Deep Value Disconnect:
Despite strong profitability and shareholder returns, GeoPark trades at a significant discount, possibly due to broader sentiment against fossil fuel investments.
Conclusion:
With an IV/P of 5.10, GeoPark Ltd (GPRK) appears to be trading at a steep discount to its intrinsic value. The combination of massive free cash flow, high shareholder returns, and strong asset profitability makes it an attractive candidate for deep value investors. While country risk and energy sector headwinds may weigh on sentiment in the short term, the fundamentals suggest GeoPark could deliver substantial upside if the market re-rates its potential.
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