Is ConocoPhillips a Value Opportunity After 19% Drop and New Permian Basin Moves?

• If you have ever wondered whether ConocoPhillips is priced right or might be a hidden value opportunity, you are in the right place.
• The stock has pulled back by 4.4% over the past week and is down 19.1% for the last year, even after a powerful 144.5% rally over the past five years. These are clear signs of changing investor sentiment and shifting risk perceptions.
• Recent headlines have focused on ConocoPhillips' ongoing energy transition initiatives and portfolio updates, including high-profile asset acquisitions and moves to strengthen its position in the Permian Basin. These strategic maneuvers are stirring up both excitement and fresh questions about where the stock is headed next.
• When it comes to pure valuation, ConocoPhillips scores a strong 5 out of 6 on our simple value checks, but there are multiple ways to judge a company's worth. Let’s break down how the numbers really stack up, and stick around for a deeper perspective that could change the way you see value altogether.

Find out why ConocoPhillips's -19.1% return over the last year is lagging behind its peers.

Approach 1: ConocoPhillips Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model calculates a company’s value by estimating all future cash flows it can generate and then discounting them back to today’s dollar value. This approach aims to capture what ConocoPhillips is truly worth based on its ability to produce cash over time.

Currently, ConocoPhillips generates Free Cash Flow (FCF) of roughly $7.88 billion. Analyst estimates suggest this could grow to about $10.24 billion by 2029, with projections extending even further as cash flows are extrapolated for the following years by Simply Wall St. For added context, the projected FCF for 2035 is over $13.05 billion. These figures indicate an anticipated steady increase in ConocoPhillips’ cash-generating power, which is a promising signal for long-term value investors.

Based on these modeled cash flows and the 2 Stage Free Cash Flow to Equity methodology, ConocoPhillips’ estimated intrinsic value stands at $210.69 per share. With this valuation, the DCF analysis suggests the stock is trading at a 58.5% discount, meaning it is significantly undervalued compared to its calculated fair price.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests ConocoPhillips is undervalued by 58.5%. Track this in your watchlist or portfolio, or discover 926 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

The Price-to-Earnings (PE) ratio is a widely used valuation metric for analyzing profitable companies because it quickly shows how much investors are willing to pay for a dollar of earnings. For a company like ConocoPhillips, which posts consistent profits, the PE ratio offers valuable insight into how the stock is valued relative to its earnings power.

What counts as a fair or normal PE ratio varies based on growth expectations and perceived risk. Companies with stronger growth prospects or lower risks often command a higher PE since investors anticipate better future results. Conversely, higher uncertainty or slower growth can bring that multiple down.

ConocoPhillips currently trades at a PE ratio of 12.2x. This is very close to both its peer average of 12.2x and the broader oil and gas industry average of 13.1x. However, averages do not reflect all the specifics of a company’s future prospects, profitability, or risk profile.

This is where Simply Wall St's proprietary Fair Ratio becomes especially useful. The Fair Ratio, calculated at 19.3x for ConocoPhillips, considers the company’s growth outlook, profit margin, market cap, inherent risks, and how it stacks up within its industry. Unlike traditional benchmarks, this tailored approach adjusts for the full picture of what makes the business unique. It creates a more personalized and relevant valuation yardstick.

Since ConocoPhillips' actual PE ratio of 12.2x is noticeably below its Fair Ratio of 19.3x, this suggests the stock may be undervalued according to this rigorous, company-specific measure.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1430 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’s introduce you to Narratives, a fresh approach that connects a company’s story directly to its financial forecast and fair value. A Narrative is your personalized perspective on ConocoPhillips, where you combine your own assumptions about the future, such as revenue, earnings, and profit margins, with your view of what the business can achieve. This makes it easy to see how your outlook aligns (or clashes) with what the market is pricing in.

Narratives are available to every investor on Simply Wall St’s Community page and used by millions to help them make more informed investment decisions. Narratives are dynamic, updating whenever new information comes out like earnings releases or important news, ensuring your view always reflects the latest facts. They empower you to act confidently. By comparing your fair value to the actual share price, you can clearly see if now is a time to buy, hold, or sell.

For example, some investors believe ConocoPhillips will outperform thanks to expanding LNG projects and aggressive asset optimization, placing fair value as high as $137.0 per share. Others are more cautious, concerned about execution and regulatory risks, and see fair value much lower, at $100.0 per share. Narratives help you define, track, and update your own story, making investment analysis both smarter and more personal.

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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