Occidental Petroleum: Low Cost Opportunity | Nasdaq
I am bullish on Occidental Petroleum (OXY), as Wall Street analysts are generally bullish on this and the mid price target indicates strong upside potential over the next year. In addition, activity should benefit from macroeconomic trends and valuation multiples look very cheap compared to historical averages.
Occidental Petroleum is a company founded in 1920 and headquartered in Texas, USA. In the United States, Chile and Canada, the Company operates as a petrochemical manufacturing country, and in Colombia, the Middle East and the United States, it also focuses on hydrocarbon exploration. The main objective of the company, however, remains the exploration and production of natural gas and oil.
Additionally, Occidental Petroleum also operates in the midstream and marketing segment. The energy company is generally considered a leader in the area of carbon management. One of the company’s significant operations is in northern Oman, where the company’s Muradi Huraymah gas plant operates.
Occidental Petroleum operates in the energy and power sector and has created an unrivaled profile in the oil and gas category. The company uses state-of-the-art technology to reach hard-to-recover reserves and increase production. These factors have provided the company with a superior position in the market, both locally and internationally.
In addition to technology, the company has shifted its focus to cost-cutting tactics and more reliable operational efficiency, supported by its strong infrastructure. Its subsidiaries, such as Oxychem, have also helped Occidental Petroleum expand into the petrochemical industry with a robust range of products and offerings. In 2020, the company was able to produce 1,037 thousand barrels of oil equivalent in the United States alone, which represented 77% of its global production.
According to the company’s 2020 annual report, Occidental Petroleum achieved net sales of $17,809 million and was able to reduce its debt by $2.4 billion. Revenue and other income totaled $16,261 million. However, this is a decrease from the annual results of the previous two years, representing a total of $21,750 million and $18,934 million in 2019 and 2018, respectively.
Net loss attributable to common shareholders for 2020 was $17.06 for basic and diluted shares. This is a staggering increase from 2019 results, which showed a loss of $1.22 for the same result. The company’s total liabilities were $292 million.
OXY shares look cheap here, as they are trading well below their historical averages based on an enterprise value to EBITDA ratio and price to normalized earnings per share.
Its enterprise value to EBITDA ratio is 5.51 times compared to its historical average of 7.95 times and its price-to-normalized earnings per share ratio is 10.22 times compared to its historical average of 18.50. time.
Meanwhile, analysts expect revenue to grow 5.2% in 2022 and normalized earnings per share to grow 36.6% in 2022.
The Taking of Wall Street
According to Wall Street analysts, OXY has a moderate buy analyst consensus based on eight buy ratings, three hold ratings and two sell ratings over the past 3 months. Additionally, the average OXY price target of $43.08 puts the upside potential at 14.7%.
Summary and conclusions
OXY stock is supported by significant energy activity which should be supported by inflationary trends and the reopening of the global economy. Indeed, the worst impacts of the COVID-19 pandemic should finally begin to subside in the coming months.
On top of that, Wall Street analysts are generally bullish on the stock here and the mid-price target implies substantial upside potential over the next year. Last but not least, the stock looks very cheap compared to average historical valuation multiples
Therefore, now may be the time for investors to consider adding stocks to the stock.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.