- United States
- Oil and Gas
Here's Why Occidental Petroleum (NYSE:OXY) Has Caught The Eye Of Investors
For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
In contrast to all that, many investors prefer to focus on companies like Occidental Petroleum (NYSE:OXY), which has not only revenues, but also profits. Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
Check out our latest analysis for Occidental Petroleum
Occidental Petroleum's Improving Profits
Investors and investment funds chase profits, and that means share prices tend rise with positive earnings per share (EPS) outcomes. So a growing EPS generally brings attention to a company in the eyes of prospective investors. Commendations have to be given in seeing that Occidental Petroleum grew its EPS from US$2.12 to US$13.80, in one short year. Even though that growth rate may not be repeated, that looks like a breakout improvement. This could point to the business hitting a point of inflection.
It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. The music to the ears of Occidental Petroleum shareholders is that EBIT margins have grown from 17% to 37% in the last 12 months and revenues are on an upwards trend as well. Both of which are great metrics to check off for potential growth.
The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.
Fortunately, we've got access to analyst forecasts of Occidental Petroleum's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Occidental Petroleum Insiders Aligned With All Shareholders?
Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
While some insiders did sell some of their holdings in Occidental Petroleum, one lone insider trumped that with significant stock purchases. Specifically the President, Vicki Hollub, spent US$798k, paying about US$56.24 per share. That certainly piques our interest.
On top of the insider buying, it's good to see that Occidental Petroleum insiders have a valuable investment in the business. Notably, they have an enviable stake in the company, worth US$120m. This comes in at 0.2% of shares in the company, which is a fair amount of a business of this size. This should still be a great incentive for management to maximise shareholder value.
While insiders are apparently happy to hold and accumulate shares, that is just part of the big picture. That's because Occidental Petroleum's CEO, Vicki Hollub, is paid at a relatively modest level when compared to other CEOs for companies of this size. Our analysis has discovered that the median total compensation for the CEOs of companies like Occidental Petroleum, with market caps over US$8.0b, is about US$13m.
Occidental Petroleum's CEO took home a total compensation package worth US$11m in the year leading up to December 2021. That comes in below the average for similar sized companies and seems pretty reasonable. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.
Does Occidental Petroleum Deserve A Spot On Your Watchlist?
Occidental Petroleum's earnings have taken off in quite an impressive fashion. To sweeten the deal, insiders have significant skin in the game with one even acquiring more. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Occidental Petroleum deserves timely attention. We should say that we've discovered 2 warning signs for Occidental Petroleum (1 can't be ignored!) that you should be aware of before investing here.
The good news is that Occidental Petroleum is not the only growth stock with insider buying. Here's a list of them... with insider buying in the last three months!
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
Valuation is complex, but we're helping make it simple.
Find out whether Occidental Petroleum is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.View the Free Analysis
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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.
Occidental Petroleum Corporation, together with its subsidiaries, engages in the acquisition, exploration, and development of oil and gas properties in the United States, the Middle East, North Africa, and Latin America.
Outstanding track record and good value.