Occidental Petroleum (OXY) Valuation Check After Recent Share Price Momentum

Occidental Petroleum (OXY) is back on many investors’ screens after recent share price gains, with the stock up about 12% over the past week and 25% over the past 3 months.

See our latest analysis for Occidental Petroleum.

That recent momentum sits on top of a 22.3% year to date share price return, compared with a more modest 6.3% 1 year total shareholder return and a 3 year total shareholder return of negative 7.6%, suggesting short term enthusiasm has picked up while longer term holders have had a bumpier ride.

If this move in Occidental has you rethinking your exposure to energy and resources, it could be a good moment to look at 25 elite gold producer stocks as another way to find potential opportunities in commodity related stocks.

So with Occidental showing a 49% intrinsic discount but trading slightly above the average analyst target, should you see this as a genuine value opportunity, or has the market already factored in the company’s future growth?

Most Popular Narrative: 24.1% Undervalued

Occidental Petroleum’s last close at $51.84 sits well below the most followed narrative fair value of $68.29, which frames the current 49% intrinsic discount debate in a very different light.

Occidental’s current value is shaped by a combination of lessons learned from past mistakes and recent bold strategic moves. The OxyChem sale and CrownRock acquisition have reshaped the balance sheet and asset base, while low carbon initiatives like STRATOS aim to turn carbon removal into a scalable commercial business.

Read the complete narrative.

Curious how this narrative gets to a premium fair value without assuming sky high revenue growth, and yet leans heavily on future earnings power and margins? The core of the story rests on what happens to profitability, capital intensity and the long term cash flows from both hydrocarbons and carbon capture. If you want to see which assumptions really move the needle in this valuation, the full narrative lays it out in black and white.

Result: Fair Value of $68.29 (UNDERVALUED)

Have a read of the narrative in full and understand what’s behind the forecasts.

However, this story can break if Permian inventory quality disappoints, or if STRATOS carbon capture costs and US 45Q tax support do not play out as planned.

Find out about the key risks to this Occidental Petroleum narrative.

Another View: Market Multiple Sends A Different Signal

That 49% discount to our cash flow estimate sits awkwardly beside how the share price looks on earnings. On a P/E of 37.9x, Occidental trades well above the US Oil and Gas industry at 14.4x, peers at 22.8x and our fair ratio of 27x, which points to valuation risk if sentiment cools.

For a closer look at what this gap might mean for you as an investor, See what the numbers say about this price — find out in our valuation breakdown.

Next Steps

If this mix of opportunities and concerns feels finely balanced, it may be worth taking time now to review the full risk and reward picture for yourself, starting with 2 key rewards and 3 important warning signs.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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