Has the Market Mispriced ConocoPhillips After Its Recent 5.4% Rebound?

• If you are wondering whether ConocoPhillips is quietly turning into a bargain or if the market is already pricing in its best days, this breakdown is for you.
• The stock has bounced about 5.4% over the last week and 3.7% over the past month, even though it is still down roughly 8.3% year to date and 8.2% over the last year, following a 157.4% gain over five years.
• Recent moves in energy prices, shifting expectations around long term oil demand, and ongoing capital discipline across the sector have all helped reshape how investors think about companies like ConocoPhillips. At the same time, headlines around supply constraints, geopolitics, and energy transition policy are keeping risk perceptions in flux, which can create mispricings for patient investors.
• Despite the volatility, ConocoPhillips scores a full 6/6 on our valuation checks, suggesting the current price could be more attractive than recent performance implies. We will walk through those methods next and also introduce a more powerful way to think about valuation that we will unpack at the end.

Find out why ConocoPhillips's -8.2% return over the last year is lagging behind its peers.

Approach 1: ConocoPhillips Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a company is worth by projecting the cash it can generate in the future and discounting those cash flows back to today, using a required rate of return.

For ConocoPhillips, the latest twelve month free cash flow is about $7.9 billion, and analysts expect this to rise steadily as production and pricing assumptions evolve. By 2029, free cash flow is projected to reach roughly $10.2 billion, with additional estimates and extrapolations taking the forecast out toward the next decade as growth rates gradually slow.

When these projected cash flows are discounted back to today using a 2 Stage Free Cash Flow to Equity model, Simply Wall St arrives at an intrinsic value of about $210.47 per share. Compared to the current market price, this implies the stock is estimated to be trading at roughly a 56.4% discount, suggesting investors may be paying significantly less than what the underlying cash flows indicate the business could be worth.

Result: UNDERVALUED (based on this model)

Our Discounted Cash Flow (DCF) analysis suggests ConocoPhillips is undervalued by 56.4%. Track this in your watchlist or portfolio, or discover 908 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 ConocoPhillips.

Approach 2: ConocoPhillips Price vs Earnings

For profitable companies like ConocoPhillips, the price to earnings, or PE, ratio is a handy way to gauge how much investors are willing to pay for each dollar of current earnings. In general, faster growth and lower perceived risk justify a higher PE, while slower growth, more cyclicality, or higher risk usually call for a lower multiple.

ConocoPhillips currently trades on a PE of about 12.9x, which is roughly in line with its Oil and Gas industry average of about 13.6x and very close to the peer group average of around 13.0x. On those simple comparisons, the stock looks fairly typical for its sector.

Simply Wall St also calculates a Fair Ratio of 20.7x, a proprietary estimate of what PE might be appropriate given ConocoPhillips earnings growth outlook, profitability, size, industry and specific risk profile. Because it blends these fundamentals, the Fair Ratio goes a step beyond blunt peer or industry comparisons that ignore differences in quality, growth and risk. With the current PE well below this 20.7x Fair Ratio, the multiple based view points to ConocoPhillips being undervalued on earnings.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1442 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your ConocoPhillips Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce Narratives, a simple tool on Simply Wall St's Community page that lets you spell out your story for ConocoPhillips, link that story to specific assumptions about future revenue, earnings and margins, and automatically turn those into a fair value you can compare to the current price to help inform a decision on whether to buy, hold or sell. The whole view updates dynamically as new news or earnings arrive. For example, one investor might build a bullish ConocoPhillips Narrative that leans on strong LNG growth, rising margins and a fair value above the current analyst high of about $137. Another might take a more cautious view that stresses execution and transition risks and lands closer to the lower end of expectations near $100. Narratives makes it easy to see, compare and refine these perspectives so your decisions are grounded in a clear, numbers backed storyline rather than isolated ratios.

Do you think there's more to the story for ConocoPhillips? 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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