Over the past six months, Occidental Petroleum’s shares (currently trading at $55.30) have posted a disappointing 11.1% loss, well below the S&P 500’s 16.6% gain. This may have investors wondering how to approach the situation.
Given the weaker price action, is now the time to buy OXY? Find out in our full research report, it’s free.
Why Are We Positive on Occidental Petroleum?
Backed by Warren Buffett's Berkshire Hathaway as a major shareholder, Occidental Petroleum (NYSE: OXY) explores for, develops, and produces oil, natural gas liquids, and natural gas, primarily in the United States and Middle East.
1. Long-Term Revenue Growth Disappoints
Cyclical sectors like Energy often flatter weaker operators during favorable price environments, but a longer-term lens separates those from businesses that can consistently perform across market cycles. Unfortunately, Occidental Petroleum’s 6.5% annualized revenue growth over the last five years was sluggish. This wasn’t a great result compared to the rest of the energy upstream and integrated energy sector, but there are still things to like about Occidental Petroleum.
2. Economies of Scale Give It Negotiating Leverage with Suppliers
In Energy, scale separates fragile single-asset producers from platform-style businesses that generate revenue across entire basins and infrastructure networks.
Occidental Petroleum’s $24.47 billion of revenue in the last year is top-tier for the industry, suggesting the type of diversification that reduces operational risk.
3. Excellent Free Cash Flow Margin Boosts Reinvestment Potential
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
Occidental Petroleum has shown terrific cash profitability, driven by its lucrative business model that enables it to reinvest, return capital to investors, and stay ahead of the competition. The company’s free cash flow margin was among the best in the energy upstream and integrated energy sector, averaging 23.6% over the last five years.
Final Judgment
These are just a few reasons why we’re bullish on Occidental Petroleum. With the recent decline, the stock trades at 11.2× forward P/E (or $55.30 per share). Is now a good time to initiate a position? See for yourself in our in-depth research report, it’s free.
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