Occidental Petroleum (OXY): Rethinking Valuation as Investors Reassess the Outlook

Occidental Petroleum (OXY) shares have seen movement recently, giving investors plenty to keep an eye on as they reassess the company’s outlook. Let’s take a closer look at how the stock is trading and what factors have been driving sentiment.

See our latest analysis for Occidental Petroleum.

Occidental Petroleum's recent share price dip has some investors recalibrating, but it follows a longer downtrend. The 1-year share price return is negative, while the company’s total shareholder return over five years still clocks in at an impressive 343%. Momentum has slowed, reflecting a cautious outlook even as fundamentals remain in focus.

If news about OXY has sparked your interest, now’s a good time to broaden your search and discover fast growing stocks with high insider ownership

With shares trading below analyst targets and ongoing debate around valuation, the question lingers: is Occidental Petroleum currently undervalued, or has the market already accounted for future growth in the share price?

Most Popular Narrative: 19.1% Undervalued

Occidental Petroleum's most popular narrative, according to Dzitkowskik, sees a fair value of $55.05 per share, which stands notably above the current close of $44.52. The stage is set for a potential re-rating if the company’s evolving business model delivers as projected in this narrative.

OXY is a pioneer in CCS, investing heavily in Direct Air Capture (DAC) technology and related infrastructure (for example, STRATOS facility in West Texas). They aim to make CCS a substantial part of their business. OXY believes CCS could be a multi-trillion-dollar global industry. Their early leadership positions them to capture a meaningful share of this market if it develops as they anticipate.

Read the complete narrative.

Curious what happens if OXY’s carbon ambitions scale up? The logic behind this valuation bets on game-changing business diversification and a future profit engine outside oil. Don’t miss the full story; the real numbers driving this bold outlook await in the narrative.

Result: Fair Value of $55.05 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, slower-than-expected progress on carbon capture or persistent weakness in oil prices could quickly undermine these optimistic projections and reframe the outlook.

Find out about the key risks to this Occidental Petroleum narrative.

Another View: What Do Multiples Say?

Looking beyond DCF, Occidental Petroleum is currently trading at a price-to-earnings ratio of 25.3x. This stands well above the US Oil and Gas industry average of 13.4x and also the company’s own fair ratio of 21.2x. While it is actually cheaper than its peer average of 31.7x, the sizable premium to industry norms suggests there could be downside risk if sentiment or earnings change.

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Occidental Petroleum Narrative

If you see things differently or want to analyze Occidental Petroleum on your terms, you can craft a personalized narrative in just a few minutes. Do it your way

A great starting point for your Occidental Petroleum research is our analysis highlighting 2 key rewards and 4 important warning signs that could impact your investment decision.

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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.

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