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.
