BP (LSE:BP.) Valuation Check After Recent Share Price Gains and Improving Earnings Momentum

BP (LSE:BP.) has quietly pushed higher over the past month, with shares gaining about 4% as investors digest improving earnings momentum and firmer crude prices, setting up a fresh look at valuation today.

See our latest analysis for BP.

That move builds on a solid run, with BP delivering a roughly mid-teens year to date share price return and a strong double digit one year total shareholder return. This suggests momentum is quietly rebuilding as markets reassess cash generation and capital returns.

If you want to see how BP compares with peers on growth and capital discipline, it is a good time to explore aerospace and defense stocks as another pocket of the market where cash flows really matter.

With earnings ticking higher, crude supportive and the shares still trading below some estimates of intrinsic value, investors now face a crucial question: is BP undervalued, or are markets already pricing in the next leg of growth?

Most Popular Narrative: 2.9% Undervalued

With BP closing at £4.64 against a narrative fair value of £4.78, the story leans slightly positive and hints at underappreciated cash generation.

Portfolio high-grading and disciplined capital allocation via active divestment of lower-quality or stranded assets and a focus on best-in-class project returns will streamline BP's asset base and support more stable, higher-margin earnings as carbon pricing and ESG pressures increase, consolidating the position of large incumbents.

Read the complete narrative.

Curious what long term revenue path, margin rebuild, and profit multiple are needed to back this stance? The projections behind that fair value may surprise you.

Result: Fair Value of £4.78 (UNDERVALUED)

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

However, recent impairments in hydrogen and biofuels, along with lingering downstream pressures, could derail margin rebuild assumptions and challenge the underappreciated cash generation story.

Find out about the key risks to this BP narrative.

Another Lens on Value

While our narrative fair value points to only a small 2.9% upside, BP's current price to earnings ratio of 62.5 times looks stretched against both its fair ratio of 21.1 times and the European oil and gas average of 11.6 times. This raises questions about downside risk if sentiment cools.

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own BP Narrative

If you see the story differently or prefer to dig into the numbers yourself, you can build a custom narrative in minutes: Do it your way.

A great starting point for your BP research is our analysis highlighting 2 key rewards and 3 important warning signs that could impact your investment decision.

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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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