Does Chevron’s Hess Merger Make Its Current Share Price Attractive in 2025?

If you have been eyeing Chevron lately and trying to decide whether to stick with your shares, add more, or just move on, you are definitely not alone. There is a lot to unpack right now. The stock has had a fairly bumpy stretch, closing most recently at $155.56. After a solid jump of 1.6% over the last week, Chevron is still shaking off a 2.9% decline over the past month. Taking a broader view, you will see a 6.0% gain for the year to date and an even more impressive 177.8% surge over five years, rewarding patient, long-term holders.

Much of this long-term growth story is tied to Chevron’s role in supplying the world’s energy and how oil prices have moved. Recent action has also been shaped by headlines around the company’s pursuit of renewable investments and a major merger in the works with Hess Corporation. These moves show Chevron adapting to a changing energy landscape, a shift investors have both cheered and worried over. The mix of optimism and skepticism is clearly playing out in the share price.

So, is Chevron undervalued, overvalued, or fairly priced right now? If we look at the numbers, its valuation score stands at 2 out of 6, suggesting it only passes a couple of the classic value investor’s tests. That’s a useful starting point. Next, we will break down exactly which valuation methods are flagging Chevron as attractive and where it is falling short. Plus, I will share a more insightful approach to thinking about stock value that goes beyond the usual methods by the end of this article.

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

Approach 1: Chevron Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company's true value by forecasting its future cash flows and discounting them back to the present. This process reflects what those cash flows are worth today. For Chevron, this involves analyzing how much cash the business is expected to generate in the coming years and what those future dollars are worth in today's terms.

Chevron's latest trailing twelve months Free Cash Flow sits at $17.36 billion, with analysts expecting that figure to grow steadily. Over the next decade, projections show Free Cash Flow reaching as high as $39.67 billion by 2035. Estimates beyond five years are based on reasonable extrapolations. Cash flow is projected to climb from $21.04 billion in 2026, with each subsequent year rising according to industry trends and analyst expectations.

Based on this two-stage DCF approach, Chevron's intrinsic value is estimated at $389.26 per share. With shares recently trading at $155.56, the model sees the stock as about 60% undervalued. This significant gap suggests that, at least by the numbers, Chevron's market price is not yet reflecting its long-term cash-generating potential.

Result: UNDERVALUED

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

Our Discounted Cash Flow (DCF) analysis suggests Chevron is undervalued by 60.0%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Chevron Price vs Earnings

The Price-to-Earnings (PE) ratio is a popular way to value profitable companies like Chevron because it directly relates the company’s market value to its ability to generate earnings. When evaluating a stock using the PE ratio, it's important to remember that companies with higher expected growth or lower risks generally justify a higher "normal" or "fair" PE. Conversely, slower growth or higher risk brings that fair ratio down.

Chevron currently trades at a PE ratio of 23.0x, meaning its stock price is about 23 times its most recent annual earnings. This compares to an industry average PE of 12.8x and an average of 20.3x for its closest peers. At first glance, this suggests that Chevron is valued above both the broader oil and gas sector and its immediate competitors.

To go a step further, Simply Wall St uses a proprietary “Fair Ratio” of 22.3x for Chevron. This figure is tailored based on variables like expected profit growth, risk, profit margins, market size, and the company's industry context. In other words, the Fair Ratio gives a more precise benchmark than simply looking at the industry average or peer group because it reflects Chevron’s unique risk and return profile. In this case, Chevron’s current PE of 23.0x is very close to its Fair Ratio, meaning the stock is trading near what would be considered its fair value on expected earnings.

Result: ABOUT RIGHT

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

Upgrade Your Decision Making: Choose your Chevron Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is more than just a number; it is the story you build behind a company’s potential, connecting your view of its business opportunities, risks, and trajectory to a financial forecast and, in turn, a fair value estimate. With Narratives, you can easily translate your beliefs about factors like future revenue, profit margins, and industry shifts into concrete investment decisions, all through an accessible workspace available within Simply Wall St's Community page, used by millions of investors.

Narratives empower you to make smarter buy or sell decisions by showing how your projected fair value stacks up against the current share price, with automatic updates as new news, earnings, or events unfold. For example, when it comes to Chevron, some users focus on strong Permian production and renewables for long-term growth and value the stock near $197, while others point to transition risks and set their fair value closer to $124. Narratives highlight these different views, helping you see if now is the right time to act, based on your story and not just the standard ratios.

Do you think there's more to the story for Chevron? Create your own Narrative to let the Community know!

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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