A strong performer from today's morning trading session is BP p.l.c., whose shares rose 1.8% to $34.11 per share. For those of you thinking about investing in the stock, here is a brief value analysis of the stock using the company's basic fundamental ratios.
an Increase in Expected Earnings Improves Its Value Outlook but Priced at a Premium:
BP p.l.c. provides carbon products and services. The company operates through Gas & Low Carbon Energy, Oil Production & Operations, and Customers & Products segments. The company belongs to the Energy sector, which has an average price to earnings (P/E) ratio of 13.84 and an average price to book (P/B) ratio of 2.05. In contrast, BP p.l.c. has a trailing 12 month P/E ratio of 13.2 and a P/B ratio of 8.44.
When we divide BP p.l.c.'s P/E ratio by its expected EPS growth rate of the next five years, we obtain its PEG ratio of -0.48. 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.
The Company's Revenues Are Declining:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $303,738 | $163,526 | $109,078 | $164,195 | $248,891 | $213,032 |
| Operating Margins | 6% | 7% | -20% | 11% | 7% | 13% |
| Net Margins | 3% | 3% | -19% | 5% | -1% | 7% |
| Net Income (M) | $9,578 | $4,190 | -$20,729 | $8,487 | -$1,357 | $15,880 |
| Diluted Shares (M) | 21,538 | 21,549 | 21,428 | 20,791 | 19,110 | 17,914 |
| Earnings Per Share | $0.47 | $0.2 | -$1.0 | $0.37 | -$0.13 | $0.86 |
| EPS Growth | n/a | -57.45% | -600.0% | 137.0% | -135.14% | 761.54% |
| Free Cash Flow (M) | -$5,479 | $3,157 | -$2,595 | $7,612 | $10,807 | $9,338 |
| CAPEX (M) | $28,352 | $22,613 | $14,757 | $16,000 | $30,125 | $22,701 |
| Total Debt (M) | $55,803 | $57,237 | $72,664 | $61,176 | $46,944 | $51,954 |
| Net Debt / EBITDA | 0.96 | 1.18 | -6.07 | 0.93 | 0.55 | 0.44 |
| Current Ratio | 1.05 | 1.12 | 1.22 | 1.15 | 1.09 | 1.21 |
BP p.l.c. has generally positive cash flows and decent operating margins with a positive growth rate. Additionally, the company's financial statements display a strong EPS growth trend and healthy leverage levels. However, the firm has declining revenues and a flat capital expenditure trend. Finally, we note that BP p.l.c. has just enough current assets to cover current liabilities, as shown by its current ratio of 1.21.
