Shares of ConocoPhillips (COP) Fall Again, Closing in on 52 Week Low.

ConocoPhillips was one of the market's biggest losers today, losing 4.7% of its value and underperforming both the S&P500 and Dow Industrial composite indices by -0.0%. The large-cap Energy company ended the day at $112.05, closing in on its 52 week high low of $91.53 and is 17.18% below its average target price of $135.3. Over the last 12 months, ConocoPhillips is down -2.0%, and has underperformed the S&P 500 by 15.0%. The stock has an average analyst rating of buy.

ConocoPhillips has a trailing 12 month price to earnings (P/E) ratio of 10.7, which corresponds to its share price divided by its trailing earnings per share (EPS) of $10.43. The company's forward P/E ratio is 10.9 based on its forward EPS of $10.26.

Earnings refer to the net income of the company from its sales operations, and the P/E ratio tells us how much investors are willing to pay for each dollar of these earnings. By way of comparison, the Energy sector has historically had an average P/E ratio of 7.54. Whether the company's P/E ratio is within a high or low range tells us how investors are currently valuing the stock's earning potential, but it doesn't tell us how its price will move in the future.

Another metric for valuing a stock is its Price to Book (P/B) Ratio, which consists in its share price divided by its book value per share. The book value refers to the present value of the company if it sold all its tangible assets and paid off all debts today. ConocoPhillips's P/B ratio of 2.82 indicates that the market may be overvaluing the company when compared to the average P/B ratio of the Energy sector, which is 1.68.

To understand ConocoPhillips's business, and therefore its attractiveness as a potential investment, we must analyze its margins in two steps. First, we look at its gross margins, which take into account only the direct cost of providing the product or service to the customer. This enables us to determine whether the company benefits from an advantageous market position:

Date Reported Revenue ($ k) Cost of Revenue ($ k) Gross Margins (%) YoY Growth (%)
2023-02-16 81,079,000 -33,971,000 57 -8.06
2022-02-17 47,863,000 -18,158,000 62 10.71
2021-02-16 18,707,000 -8,078,000 56 -15.15
2020-02-18 34,704,000 -11,842,000 66 6.45
2019-02-19 37,664,000 -14,294,000 62 10.71
2018-02-20 29,106,000 -12,475,000 56
  • Average gross margins: 59.8 %
  • Average gross margins growth rate: 0.3 %
  • Coefficient of variability (lower numbers indicate more stability): 6.9 %

Next, we consider the ConocoPhillips's operating margins, which take into account overhead. This tells us whether the company's business model is fundamentally profitable or not:

Date Reported Total Revenue ($ k) Operating Expenses ($ k) Operating Margins (%) YoY Growth (%)
2023-02-16 81,079,000 -19,311,000 34 21.43
2022-02-17 47,863,000 -15,841,000 28 354.55
2021-02-16 18,707,000 -12,758,000 -11 -142.31
2020-02-18 34,704,000 -13,990,000 26 -3.7
2019-02-19 37,664,000 -13,340,000 27 237.5
2018-02-20 29,106,000 -14,177,000 8
  • Average operating margins: 18.7 %
  • Average operating margins growth rate: 27.4 %
  • Coefficient of variability (lower numbers indicate more stability): 90.9 %

Since both ConocoPhillips's gross margins and operating margins tend to be positive, we know that its business is currently profitable. However, it's important to take into account their variability and overall growth trend to make a definitive conclusion regarding the company's strength.

To get a better idea of ConocoPhillips's finances, we will now look at its cash flows. Often touted as a general yardstick for a company's financial health, cash flows represent the sum of inflows and outflows of cash from all sources, including capital expenditures:

Date Reported Cash Flow from Operations ($ k) Capital expenditures ($ k) Free Cash Flow ($ k) YoY Growth (%)
2023-02-16 28,314,000 -6,688,000 35,002,000 69.36
2022-02-17 16,996,000 -3,671,000 20,667,000 152.04
2021-02-16 4,802,000 -3,398,000 8,200,000 -44.32
2020-02-18 11,104,000 -3,624,000 14,728,000 -20.83
2019-02-19 12,934,000 -5,668,000 18,602,000 948.63
2018-02-20 7,077,000 9,269,000 -2,192,000
  • Average free cash flow: $35.0 Billion
  • Average free cash flow growth rate: 0.0 %
  • Coefficient of variability (lower numbers indicating more stability): 6795100853.4%

This is the pool of liquidity that the company can use to reinvest in its business and to pay its equity investors a dividend. Investors in ConocoPhillips enjoy a dividend yield of 4.6%, and they can expect this to continue based on the company's positive cash flows.

Overall, ConocoPhillips seems to be a strong business with an attractive valuation in numeric terms. Potential investors may want to take a closer look at the stock, and focus on whether it also has qualitative factors that show that it can provide solid returns.

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.