Is ConocoPhillips (COP) a Good Value at Today's Prices?

ConocoPhillips investors have watched their shares sink by -1.8% to a price of $102.02 today. Has this correction brought the company into a decent price window?

ConocoPhillips's Valuation Is in Line With Its Sector Averages:

ConocoPhillips explores for, produces, transports, and markets crude oil, bitumen, natural gas, liquefied natural gas (LNG), and natural gas liquids in the United States and internationally. The company belongs to the Energy sector, which has an average price to earnings (P/E) ratio of 7.54 and an average price to book (P/B) ratio of 1.68. In contrast, ConocoPhillips has a trailing 12 month P/E ratio of 8.1 and a P/B ratio of 2.58.

When we divide ConocoPhillips's P/E ratio by its expected EPS growth rate of the next five years, we obtain its PEG ratio of -1.06. Since it's negative, the company has negative growth expectations, and most investors will probably avoid the stock unless it has an exceptionally low P/E and P/B ratio.

Growing Revenues With Increasing Reinvestment in the Business:

2019-12-31 2020-12-31 2021-12-31 2022-12-31
Revenue (MM) $32,567 $18,784 $45,828 $78,494
Gross Margins 28.6% 4.5% 32.2% 38.2%
Operating Margins 21.7% -9.6% 26.3% 32.4%
Net Margins 22.07% -14.38% 17.63% 23.8%
Net Income (MM) $7,189 -$2,701 $8,079 $18,680
Net Interest Expense (MM) -1,104 -1,058 -1,126 -1,055
Net Interest Expense (MM) -$1,104 -$1,058 -$1,126 -$1,055
Depreciation & Amort. (MM) -$6,090 -$5,521 -$7,208 -$7,504
Earnings Per Share $6.4 -$2.51 $6.07 $12.56
EPS Growth n/a -139.22% 341.83% 106.92%
Diluted Shares (MM) 1,124 1,078 1,328 1,210
Free Cash Flow (MM) $4,468 $87 $11,672 $18,155
Capital Expenditures (MM) -$6,636 -$4,715 -$5,324 -$10,159
Net Current Assets (MM) -$18,551 -$20,703 -$29,205 -$27,077
Current Ratio 2.4 2.25 1.34 1.46
Long Term Debt (MM) $14,790 $14,750 $18,734 $16,226
Net Debt / EBITDA 0.59 3.65 0.71 0.28

ConocoPhillips has growing revenues and increasing reinvestment in the business and low leverage. Additionally, the company's financial statements display a strong EPS growth trend and generally positive cash flows. However, the firm has slimmer gross margins than its peers. Finally, we note that ConocoPhillips has average net margins with a positive growth rate and just enough current assets to cover current liabilities.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.