Oil & Gas Integrated company BP p.l.c. is standing out today, surging to $32.71 and marking a 3.8% change. In comparison the S&P 500 moved only -0.0%.
BP currently sits within range of its analyst target price of $34.14, which implies that its price may remain stable for the near future.
Surprisingly, analysts give the stock an average rating of buy, which shows that they believe prices could continue to move. Over the last year, BP p.l.c. has underperfomed the S&P 500 by 22.3%, moving -10.4%.
BP p.l.c., an integrated energy company, provides carbon products and services. The company is classified within the energy sector. The stock prices of energy companies are highly correlated with geopolitics: economic crisis, war, commodity prices, and politics all have an effect on the industry. For this reason, energy companies tend to have high volatility -— meaning large and frequent price swings. As global energy supplies shift towards renewables, we may see a reduced correlation between energy prices and geopolitical events.
BP p.l.c. does not release its trailing 12 month P/E ratio since its earnings per share of $-0.41 are negative over the last year. But we can calculate it ourselves, which gives us a trailing P/E ratio for BP of -79.8. Based on the company's positive earnings guidance of $3.77, the stock has a forward P/E ratio of 12.1.
The P/E ratio is the company's share price divided by its earnings per share. In other words, it represents how much investors are willing to spend for each dollar of the company's earnings (revenues minus the cost of goods sold, taxes, and overhead). As of the third quarter of 2024, the energy sector has an average P/E ratio of 18.35, and the average for the S&P 500 is 29.3.
BP p.l.c.'s financial viability can also be assessed through a review of its free cash flow trends. Free cash flow refers to the company's operating cash flows minus its capital expenditures, which are expenses related to the maintenance of fixed assets such as land, infrastructure, and equipment. Over the last four years, the trends have been as follows:
| Date Reported | Cash Flow from Operations ($ k) | Capital expenditures ($ k) | Free Cash Flow ($ k) | YoY Growth (%) |
|---|---|---|---|---|
| 2024 | 27,297,000 | 27,139,000 | 158,000 | -98.31 |
| 2023 | 32,039,000 | 22,701,000 | 9,338,000 | -13.59 |
| 2022 | 40,932,000 | 30,125,000 | 10,807,000 | 41.97 |
| 2021 | 23,612,000 | 16,000,000 | 7,612,000 | 393.33 |
| 2020 | 12,162,000 | 14,757,000 | -2,595,000 | -182.2 |
| 2019 | 25,770,000 | 22,613,000 | 3,157,000 |
- Average free cash flow: $4.75 Billion
- Average free cash flown growth rate: -45.1 %
- Coefficient of variability (lower numbers indicating more stability): 0.0 %
With its positive cash flow, the company can not only re-invest in its business, it can offer regular returns to its equity investors in the form of dividends. Over the last 12 months, investors in BP have received an annualized dividend yield of 1.0% on their capital.
Value investors often analyze stocks through the lens of its Price to Book (P/B) Ratio (market value divided by book value). The book value refers to the present value of the company if the company were to sell off all of its assets and pay all of its debts today - a number whose value may differ significantly depending on the accounting method.
BP p.l.c.'s P/B ratio indicates that the market value of the company exceeds its book value by a factor of 8, so the company's assets may be overvalued compared to the average P/B ratio of the Energy sector, which stands at 1.6 as of the third quarter of 2024.
With a negative P/E ratio., a higher than Average P/B Ratio, and positive cash flows with a downwards trend, we can conclude that BP p.l.c. is probably overvalued at current prices. The stock presents poor growth indicators because of its weak operating margins with a stable trend, and no PEG ratio.
