How Do BP’s Big Green Investments Impact Its Share Price in 2025?

• Wondering if BP shares are currently a value buy or if you might be paying too much? Let’s take a clear-eyed look at what investors get for their money right now.
• After a modest 0.2% bump over the past week and a solid 12.7% return year-to-date, BP’s recent stock price movements are definitely catching attention, especially with a five-year gain topping 110%.
• Market sentiment has shifted in part thanks to ongoing discussions around BP’s commitment to renewable energy and recent geopolitical headlines impacting global energy supplies. For example, the company’s increased investments in low-carbon projects have generated headlines and helped set the tone for both short-term optimism and new long-term risks.
• On the numbers, BP scores just 2 out of 6 on the undervaluation checklist. This suggests there is more to the story than initial metrics show. Next up, we’ll break down BP’s valuation using a range of methods, but keep reading to discover an approach that goes even deeper than standard price checks.

BP scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: BP Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company's intrinsic value by projecting its future cash flows and then discounting them back to today’s dollars. This approach helps investors gauge whether a stock is trading below or above its calculated value based on expected performance.

For BP, the most recently reported Free Cash Flow stands at $11.1 Billion. Over the next few years, analysts expect modest changes, with projections by 2029 showing Free Cash Flow of about $10.95 Billion. Analyst estimates are available for the first five years, and projections beyond that rely on extrapolations by Simply Wall St, reflecting ongoing caution about long-term energy markets.

Using BP's two-stage DCF model, the calculated intrinsic value comes to approximately $10.07 per share. Compared to the current share price, this indicates a substantial 54.9% discount.

This means the DCF model signals BP shares are currently trading well below their estimated worth, making them significantly undervalued according to this methodology.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests BP is undervalued by 54.9%. Track this in your watchlist or portfolio, or discover 922 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for BP.

Approach 2: BP Price vs Earnings (PE)

The Price-to-Earnings (PE) ratio is a well-established method for valuing profitable companies like BP, as it directly compares a company’s market price to its earnings. Investors often use the PE ratio to quickly assess whether a stock appears expensive or cheap relative to its profit generation.

A "normal" or fair PE ratio typically reflects not just current earnings, but also expectations for growth and risk. Companies with higher growth prospects usually warrant a higher PE, while additional risks can depress what investors are willing to pay for each unit of earnings.

Currently, BP trades at a PE of 60.57x. To put this in context, the average PE ratio among its closest peers is 11.46x, and the wider Oil and Gas industry averages 13.21x. Compared to these benchmarks, BP’s current PE appears elevated.

However, Simply Wall St computes a Fair Ratio for BP at 20.63x. This sets a reasonable range tailored to BP's unique growth expectations, profit margins, market capitalization, and risk profile. Unlike simple peer or industry comparisons, this Fair Ratio provides a more nuanced benchmark because it encapsulates the company’s actual situation and outlook, rather than broad averages that may not reflect BP’s specifics.

Given BP’s current PE of 60.57x is well above its Fair Ratio of 20.63x, the analysis suggests BP shares are trading above what would be considered fair value based on these fundamentals.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your BP Narrative

Earlier we mentioned that there's an even better way to understand valuation. Let's introduce you to Narratives, a dynamic approach that connects a company’s story to its forecasted numbers and then to a fair value. This approach allows you to see what really drives an investment decision.

A Narrative is simply your unique perspective on a company like BP, explaining the assumptions you make about its future growth, margins, and risks, and how these lead to your own fair value estimate. By tying together company news, business strategy, and updated financial forecasts, Narratives bridge the gap between headlines and real-world investing. This makes your reasoning transparent and easy to revisit.

This approach is available on Simply Wall St’s Community page, where millions of investors share, compare, and update their Narratives as new information emerges, whether that’s quarterly earnings or breaking news. Narratives help you consider if BP aligns with your investment goals by showing how your assumptions compare to the current share price and to other investors’ views.

For example, some investors see BP’s fair value as high as £5.20, based on confidence in successful strategy delivery and strong global energy demand. Others estimate it as low as £3.82, reflecting concerns about capital allocation and transition risks.

Do you think there's more to the story for BP? Head over to our Community to see what others are saying!

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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