EOG Resources Inc. (EOG)

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EOG has a P/E ratio of 45.8 and a negative EV/FCF ratio over the trailing 12 months. If we stretch and compare current valuations to the five-year averages for earnings and free cash flow, EOG has a P/E ratio of 19.5 and a negative five-year EV/FCF ratio. A one-year ratio under 10 for both metrics is ideal. For a five-year metric, under 20 is ideal.

An ideal company will be consistently strong in its earnings and cash flow generation. In the past five years, EOG's net income margin has ranged from 9.5% to 39.2%. In that same time frame, unlevered free cash flow margin has ranged from -37% to 10.9%.

EOG has put up past EPS growth rates of -13.4%. Meanwhile, Wall Street's analysts expect future growth rates of 15.4%. The more consistent a company's performance has been and the more growth we can expect, the more we should be willing to pay. We've gone well beyond looking at a 45.8 P/E ratio.