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Big Oil Is At Bat

Posted: Feb 08, 2010 11:39 AM by Aryeh Katz

Tickers in this Article: BP, COP, CVX, IEO, XOM

Some of the very best buys in the investing universe right now from a purely fundamental point of view are concentrated in the integrated oil and gas majors. Just a cursory screen of price/earnings ratios, price/sales ratios and growth rates turns up four crude heavyweights at the top of the barrel.

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Crude's Heaviest American Hitter
Exxon Mobil Corp. (NYSE:XOM) is one of the world's largest companies, with a market cap of better than $315 billion and operations on every continent of the globe. The company is involved in virtually every aspect of the oil and gas business, from exploration and development to refining and marketing.

For the last twelve months XOM stock is down over 12%. It currently trades with a one year trailing earnings multiple of 16.72 and has an annual dividend yield of 2.52%. Expected growth for the coming twelve months is a different story, however. Analysts are projecting growth of nearly 50% for 2010. Current price to sales figures report in at a reasonable 1.01.

Britannia's Best Didn't Disappoint
British Petroleum plc (NYSE:BP) has an even more impressive price/sales figure at 0.76, along with perhaps the best dividend yield of all the majors at 6.09%. The stock is currently priced at 19.56x last year's earnings and is expected to grow in the coming year at a 50% clip as well.

BP stock appreciated by roughly 30% in the last year, a less impressive performance than the broad basket of oil and gas producers as represented by the iShares Dow Jones US Oil & Gas Exploration and Production Index (NYSE:IEO), which was up over 40% in the last twelve months. But counting BP's generous dividend, a year's worth of returns would have been competitive.

Chevron Corporation (NYSE:CVX) and Conoco Philips (NYSE:COP) are two American integrated majors who are also expecting big things in 2010. Estimated earnings per share growth for these two companies comes in at 64% and 74%, respectively. Chevron carries a dividend yield of 3.72 and trades with a P/E of 13.98 while COP offers investors 4% and a P/E of 15.41.

Chevron and Philips price to sales ratios are now 0.86 and 0.49.

The Wrap
Integrated oil and gas companies are looking very healthy from a valuation perspective. And if expected earnings are actualized, we might even see a few home runs from the sector in 2010. (Learn more about the oil and gas industry in the Oil And Gas Industry Primer.)

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By Aryeh Katz

Filed Under: Stock Analysis,Stocks

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