Don't Take a Position in Occidental Petroleum Stocks Without Knowing Its Fundamentals!

Now trading at a price of $65.65, Occidental Petroleum has moved 2.8% so far today.

Over the last year, Occidental Petroleum logged a 1.0% change, with its stock price reaching a high of $76.11 and a low of $55.51. Over the same period, the stock underperformed the S&P 500 index by -14.0%. As of April 2023, the company's 50-day average price was $62.24. Occidental Petroleum Corporation, together with its subsidiaries, engages in the acquisition, exploration, and development of oil and gas properties in the United States, the Middle East, North Africa, and Latin America. Based in Houston, TX, the large-cap Energy company has 11,973 full time employees. Occidental Petroleum has offered a 1.0% dividend yield over the last 12 months.

Low Leverage Levels and Exceptional EPS Growth:

2018-02-23 2019-02-21 2020-02-28 2021-02-26 2022-02-24 2023-02-27
Revenue (MM) $13,274 $18,934 $21,750 $16,261 $26,314 $37,095
Operating Margins 14% 37% 25% -17% 19% 38%
Net Margins 10.0% 22.0% -3.0% -91.0% 9.0% 36.0%
Net Income (MM) $1,311 $4,131 -$667 -$14,831 $2,322 $13,304
Net Interest Expense (MM) -$345 -$389 -$1,066 -$1,424 -$1,614 -$1,030
Depreciation & Amort. (MM) -$4,002 -$3,977 -$6,140 -$8,097 -$8,447 -$6,926
Earnings Per Share $1.71 $5.41 -$1.22 -$17.06 $1.56 $12.28
EPS Growth n/a 216.37% -122.55% -1298.36% 109.14% 687.18%
Diluted Shares (MM) 766 763 810 919 973 1,018
Free Cash Flow (MM) $8,121 $13,572 $35,687 $6,490 $13,304 $21,307
Capital Expenditures (MM) -$3,260 -$5,903 -$28,312 -$2,535 -$2,870 -$4,497
Net Current Assets (MM) -$13,184 -$12,592 -$58,325 -$52,672 -$44,498 -$33,638
Long Term Debt (MM) $9,328 $10,201 $38,537 $35,745 $29,431 $19,670
Net Debt / EBITDA 1.39 0.66 3.05 6.46 1.99 0.9

Occidental Petroleum has weak revenue growth and a flat capital expenditure trend, irregular cash flows, and just enough current assets to cover current liabilities. We also note that the company benefits from exceptional EPS growth and low leverage. However, the firm has weak operating margins with a positive growth rate.

Trades Below Its Graham Number but Has an Elevated P/E Ratio:

Occidental Petroleum has a trailing twelve month P/E ratio of 10.5, compared to an average of 7.54 for the Energy sector. Based on its EPS guidance of $5.08, the company has a forward P/E ratio of 12.3. The company doesn't provide forward earnings guidance, and the compound average growth rate of its last 6 years of reported EPS is 23.0%. On this basis, Occidental Petroleum's PEG ratio is 0.46. Using instead the 10.4% weighted average of Occidental Petroleum's earnings CAGR and the broader market's anticipated 5-year EPS growth rate, the company's PEG ratio is 1.01, which shows that its shares might be fairly priced. In contrast, Occidental Petroleum is likely overvalued compared to the book value of its equity, since its P/B ratio of 2.83 is higher than the sector average of 1.68. The company's shares are currently trading -27.3% below their Graham number. In conclusion, Occidental Petroleum's impressive cash flow trend, decent P/B ratio, and reasonable use of leverage demonstrate that the company may still be fairly valued — despite its elevated earnings multiple.

Occidental Petroleum Has an Average Rating of Buy:

The 23 analysts following Occidental Petroleum have set target prices ranging from $59.0 to $85.0 per share, for an average of $69.57 with a buy rating. As of April 2023, the company is trading -10.5% away from its average target price, indicating that there is an analyst consensus of some upside potential.

Occidental Petroleum has an above average percentage of its shares sold short because 9.7% of the company's shares are sold short. Institutions own 79.6% of the company's shares, and the insider ownership rate stands at 0.28%, suggesting a small amount of insider investors. The largest shareholder is Berkshire Hathaway, Inc, whose 25% stake in the company is worth $14,714,081,796.

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.