Monday, February 9, 2015

Analysis of BP 2015


BP, a British oil giant

Company: British Petroleum

ISIN GB0007980591 | WKN 850517

Business: A British oil giant. They are divided into two business units which are: Upstream (extracting gas and oil) and Downstream (fuels, lubricants and petrochemicals). They currently have five brands: BP(oil and gas), Aral (gas stations where I buy all my petrol), Castrol (lubricants), ampm (convenience stores) and Wild Bean Café (cafés).

Active: 80 countries world wide employing around 84,000 people.

P/E: 32.6

Here you can find the previous analysis of British Petroleum (BP) 2014.

contrarian values of P/E, P/B, ROE as well as dividend for BP

Due to extremely poor performance the P/E is high with 32.6 but the P/B is fully ok with 1.1 still it gives a clear no go from Graham. The earnings to sales are horrible with 1% and the ROE is equally bad with 3.5. The book to debt value is ok with 0.7.
In the last five years they have had a yearly revenue growth of 3.2% which is ok but not more and this then corresponds to a motivated P/E of 11 to 15 which means that BP is today highly overvalued on the market.
They spent in comparison to their small earnings plenty on research but the important thing here is that they did increase the number research since last year.
They pay a very nice dividend of 5.5% which on the other hand correspond to almost 180% of their earnings meaning it is unsustainable in the long run unless they manage to push up their earnings again.

Conclusion: Graham says no and I am uncertain. It almost looks as if it has become too much for BP. The litigations in the US that are still not settled, then the problem with Russia and now, on top of all the rest, the 50% decrease of the oil price. Today I would not make a new investment into BP since there are other oil giants being traded cheap without two of the three problems that BP currently have. I will however not sell my shares.

If this analysis is outdated then you can request a new one.

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