Occidental Petroleum Corp Valuation – March 2019 #OXY

Company Profile (excerpt from Reuters): Occidental Petroleum Corporation (Occidental), incorporated on April 9, 1986, is an oil and gas exploration and production company. The Company operates through three segments: oil and gas, chemical (OxyChem), and midstream and marketing. The oil and gas segment explores for, develops and produces oil and condensate, natural gas liquids (NGLs) and natural gas. The OxyChem segment manufactures and markets basic chemicals and vinyls. The midstream and marketing segment gathers, processes, transports, stores, purchases and markets oil, condensate, NGLs, natural gas, carbon dioxide (CO2) and power. It also trades around its assets, including transportation and storage capacity. Additionally, the midstream and marketing segment invests in entities that conduct similar activities. Occidental’s domestic upstream oil and gas operations are located in New Mexico and Texas. Its international operations are located in Bolivia, Colombia, Oman, Qatar and the United Arab Emirates (UAE).

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of OXY – March 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $48,967,841,552 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.34 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -55.40% Fail
6. Moderate PEmg Ratio PEmg < 20 42.46 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.31 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.34 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.05 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.54
MG Growth Estimate 15.00%
MG Value $59.24
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $22.31
MG Value based on 0% Growth $13.08
Market Implied Growth Rate 16.98%
Current Price $65.33
% of Intrinsic Value 110.28%

Occidental Petroleum Corporation does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $-0.42 in 2015 to an estimated $1.54 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 16.98% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Occidental Petroleum Corporation revealed the company was trading above its Graham Number of $32.19. The company pays a dividend of $3.1 per share, for a yield of 4.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 42.46, which was below the industry average of 58.42, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-16.66.

Occidental Petroleum Corporation scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$16.66
Graham Number $32.19
PEmg 42.46
Current Ratio 1.34
PB Ratio 2.31
Current Dividend $3.10
Dividend Yield 4.75%
Number of Consecutive Years of Dividend Growth 17

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $9,932,000,000
Total Current Liabilities $7,412,000,000
Long-Term Debt $10,201,000,000
Total Assets $43,854,000,000
Intangible Assets $0
Total Liabilities $22,524,000,000
Shares Outstanding (Diluted Average) 755,800,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.63
Dec2018 $5.39
Dec2017 $1.70
Dec2016 -$0.75
Dec2015 -$10.23
Dec2014 $0.79
Dec2013 $7.32
Dec2012 $5.67
Dec2011 $8.32
Dec2010 $5.56
Dec2009 $3.58
Dec2008 $8.34
Dec2007 $6.44
Dec2006 $4.87
Dec2005 $6.48
Dec2004 $2.80
Dec2003 $1.98
Dec2002 $1.31
Dec2001 $1.55
Dec2000 $2.13
Dec1999 $0.62

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.54
Dec2018 $0.79
Dec2017 -$1.09
Dec2016 -$1.47
Dec2015 -$0.42
Dec2014 $4.83
Dec2013 $6.60
Dec2012 $6.25
Dec2011 $6.51
Dec2010 $5.66
Dec2009 $5.79
Dec2008 $6.52
Dec2007 $5.25
Dec2006 $4.26
Dec2005 $3.58
Dec2004 $2.07
Dec2003 $1.64

Recommended Reading:

Other ModernGraham posts about the company

Occidental Petroleum Corp Valuation – June 2018 $OXY
Most Overvalued Stocks of the S&P 500 – March 2017
Occidental Petroleum Corp Valuation – February 2017 $OXY
Occidental Petroleum Corp Valuation – August 2016 $OXY
Occidental Petroleum Corporation – 2015 Update $OXY

Other ModernGraham posts about related companies

Phillips 66 Valuation – March 2019 #PSX
Halliburton Co Valuation – March 2019 #HAL
Kinder Morgan Inc Valuation – February 2019 $KMI
National Oilwell Varco Inc Valuation – February 2019 $NOV
Diamondback Energy Inc Valuation – February 2019 $FANG
TechnipFMC PLC Valuation – February 2019 $FTI
Marathon Petroleum Corp Valuation – February 2019 $MPC
Baker Hughes, a GE Co Valuation – February 2019 $BHGE
EOG Resources Inc Valuation – February 2019 $EOG
ConocoPhillips Valuation – February 2019 $COP

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Occidental Petroleum Corp Valuation – June 2018 $OXY

Company Profile (excerpt from Reuters): Occidental Petroleum Corporation (Occidental), incorporated on April 9, 1986, is an oil and gas exploration and production company. The Company operates through three segments: oil and gas, chemical (OxyChem), and midstream and marketing. The oil and gas segment explores for, develops and produces oil and condensate, natural gas liquids (NGLs) and natural gas. The OxyChem segment manufactures and markets basic chemicals and vinyls. The midstream and marketing segment gathers, processes, transports, stores, purchases and markets oil, condensate, NGLs, natural gas, carbon dioxide (CO2) and power. It also trades around its assets, including transportation and storage capacity. Additionally, the midstream and marketing segment invests in entities that conduct similar activities. Occidental’s domestic upstream oil and gas operations are located in New Mexico and Texas. Its international operations are located in Bolivia, Colombia, Oman, Qatar and the United Arab Emirates (UAE).

OXY Chart

OXY data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of OXY – June 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $65,167,048,809 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.26 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -85.11% Fail
6. Moderate PEmg Ratio PEmg < 20 -185.81 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.15 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.26 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 5.65 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg -$0.46
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth -$6.64
MG Value based on 0% Growth -$3.89
Market Implied Growth Rate -97.15%
Current Price $85.10
% of Intrinsic Value N/A

Occidental Petroleum Corporation does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $4.83 in 2014 to an estimated $-0.46 for 2018. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Occidental Petroleum Corporation revealed the company was trading above its Graham Number of $31.59. The company pays a dividend of $3.06 per share, for a yield of 3.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was -185.81, which was below the industry average of 87.76, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-17.2.

Occidental Petroleum Corporation scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$17.20
Graham Number $31.59
PEmg -185.81
Current Ratio 1.26
PB Ratio 3.15
Current Dividend $3.06
Dividend Yield 3.60%
Number of Consecutive Years of Dividend Growth 15

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $8,894,000,000
Total Current Liabilities $7,070,000,000
Long-Term Debt $10,309,000,000
Total Assets $42,808,000,000
Intangible Assets $0
Total Liabilities $22,086,000,000
Shares Outstanding (Diluted Average) 767,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.65
Dec2017 $1.70
Dec2016 -$0.75
Dec2015 -$10.23
Dec2014 $0.79
Dec2013 $7.32
Dec2012 $5.67
Dec2011 $8.32
Dec2010 $5.56
Dec2009 $3.58
Dec2008 $8.34
Dec2007 $6.44
Dec2006 $4.87
Dec2005 $6.48
Dec2004 $2.80
Dec2003 $1.98
Dec2002 $1.31
Dec2001 $1.55
Dec2000 $2.13
Dec1999 $0.62
Dec1998 $0.50

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$0.46
Dec2017 -$1.09
Dec2016 -$1.47
Dec2015 -$0.42
Dec2014 $4.83
Dec2013 $6.60
Dec2012 $6.25
Dec2011 $6.51
Dec2010 $5.66
Dec2009 $5.79
Dec2008 $6.52
Dec2007 $5.25
Dec2006 $4.26
Dec2005 $3.58
Dec2004 $2.07
Dec2003 $1.64
Dec2002 $1.39

Recommended Reading:

Other ModernGraham posts about the company

Most Overvalued Stocks of the S&P 500 – March 2017
Occidental Petroleum Corp Valuation – February 2017 $OXY
Occidental Petroleum Corp Valuation – August 2016 $OXY
Occidental Petroleum Corporation – 2015 Update $OXY
21 Companies in the Spotlight This Week – June 14, 2014

Other ModernGraham posts about related companies

Andeavor Valuation – May 2018 $ANDV
Halliburton Co Valuation – May 2018 $HAL
National Oilwell Varco Inc Valuation – May 2018 $NOV
Newfield Exploration Co Valuation – May 2018 $NFX
Kinder Morgan Inc Valuation – May 2018 $KMI
Range Resources Corp Valuation – May 2018 $RRC
Phillips 66 Valuation – April 2018 $PSX
Baker Hughes, a GE Co Valuation – April 2018 $BHGE
Marathon Petroleum Corp Valuation – April 2018 $MPC
TechnipFMC PLC Valuation – April 2018 $FTI

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Occidental Petroleum Corp Valuation – February 2017 $OXY

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – February 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Occidental Petroleum Corp (OXY) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Occidental Petroleum Corporation is an oil and gas exploration and production company. The Company operates through three segments: oil and gas, chemical (OxyChem), and midstream and marketing. The oil and gas segment explores for, develops and produces oil and condensate, natural gas liquids (NGLs) and natural gas. The OxyChem segment manufactures and markets basic chemicals and vinyls. OxyChem owns and operates manufacturing plants at approximately 20 domestic sites in Alabama, Georgia, Illinois, Kansas, Louisiana, Michigan, New Jersey, New York, Ohio, Pennsylvania, Tennessee and Texas, and at two international sites in Canada and Chile. The midstream and marketing segment gathers, processes, transports, stores, purchases and markets oil, condensate, NGLs, natural gas, carbon dioxide (CO2) and power. It also trades around its assets, including transportation and storage capacity. Additionally, the midstream and marketing segment invests in entities that conduct similar activities.

OXY Chart

OXY data by YCharts

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Downloadable PDF version of this valuation:

ModernGraham Valuation of OXY – February 2017

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $49,314,599,552 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.32 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -160.81% Fail
6. Moderate PEmg Ratio PEmg < 20 -42.25 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.31 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.32 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 4.75 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

Stage 2: Determination of Intrinsic Value

EPSmg -$1.54
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth -$22.27
MG Value based on 0% Growth -$13.06
Market Implied Growth Rate -25.37%
Current Price $64.89
% of Intrinsic Value N/A

Occidental Petroleum Corporation does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $6.6 in 2013 to an estimated $-1.54 for 2017. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Occidental Petroleum Corporation revealed the company was trading above its Graham Number of $14.88. The company pays a dividend of $3.02 per share, for a yield of 4.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was -42.25, which was below the industry average of 69.19, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-17.26.

Occidental Petroleum Corporation scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$17.26
Graham Number $14.88
PEmg -42.25
Current Ratio 1.32
PB Ratio 2.31
Current Dividend $3.02
Dividend Yield 4.65%
Number of Consecutive Years of Dividend Growth 15

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2016
Total Current Assets $8,428,000,000
Total Current Liabilities $6,362,000,000
Long-Term Debt $9,819,000,000
Total Assets $43,109,000,000
Intangible Assets $0
Total Liabilities $21,612,000,000
Shares Outstanding (Diluted Average) 763,800,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.35
Dec2016 -$0.75
Dec2015 -$10.23
Dec2014 $0.79
Dec2013 $7.32
Dec2012 $5.67
Dec2011 $8.32
Dec2010 $5.56
Dec2009 $3.58
Dec2008 $8.34
Dec2007 $6.44
Dec2006 $4.87
Dec2005 $6.48
Dec2004 $2.80
Dec2003 $1.98
Dec2002 $1.31
Dec2001 $1.55
Dec2000 $2.13
Dec1999 $0.62
Dec1998 $0.50
Dec1997 -$0.72

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$1.54
Dec2016 -$1.47
Dec2015 -$0.42
Dec2014 $4.83
Dec2013 $6.60
Dec2012 $6.25
Dec2011 $6.51
Dec2010 $5.66
Dec2009 $5.79
Dec2008 $6.52
Dec2007 $5.25
Dec2006 $4.26
Dec2005 $3.58
Dec2004 $2.07
Dec2003 $1.64
Dec2002 $1.39
Dec2001 $1.23

Recommended Reading:

Other ModernGraham posts about the company

Occidental Petroleum Corporation – 2015 Update $OXY
21 Companies in the Spotlight This Week – June 14, 2014
Occidental Petroleum Corp Annual Valuation – 2014 $OXY
19 Companies in the Spotlight This Week – 3/15/14
Occidental Petroleum Corp (OXY) Quarterly Valuation

Other ModernGraham posts about related companies

Carrizo Oil & Gas Inc Valuation – Initial Coverage $CRZO
Denbury Resources Inc Valuation – February 2017 $DNR
California Resources Corp Valuation – Initial Coverage $CRC
Crew Energy Inc Valuation – Initial Coverage $TSE:CR
Exxon Mobil Corp Valuation – February 2017 $XOM
Superior Energy Services Inc Valuation – Initial Coverage $SPN
2017 Oil & Gas Industry Review
Spartan Energy Corp Valuation – Initial Coverage $TSE:SPE
Crescent Point Energy Corp Valuation – Initial Coverage $TSE:CPG
Tesoro Corporation Valuation – February 2017 $TSO

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Occidental Petroleum Corp Valuation – August 2016 $OXY

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – July 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Occidental Petroleum Corp (OXY) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Occidental Petroleum Corporation is an oil and gas exploration and production company. The Company operates through three segments: oil and gas, chemical (OxyChem), and midstream and marketing. The oil and gas segment explores for, develops and produces oil and condensate, natural gas liquids (NGLs) and natural gas. The OxyChem segment manufactures and markets basic chemicals and vinyls. OxyChem owns and operates manufacturing plants at approximately 20 domestic sites in Alabama, Georgia, Illinois, Kansas, Louisiana, Michigan, New Jersey, New York, Ohio, Pennsylvania, Tennessee and Texas, and at two international sites in Canada and Chile. The midstream and marketing segment gathers, processes, transports, stores, purchases and markets oil, condensate, NGLs, natural gas, carbon dioxide (CO2) and power. It also trades around its assets, including transportation and storage capacity. Additionally, the midstream and marketing segment invests in entities that conduct similar activities.

OXY Chart

OXY data by YCharts

[level-free]
To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of OXY – August 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $59,134,928,626 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.70 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -153.32% Fail
6. Moderate PEmg Ratio PEmg < 20 -57.43 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.53 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.70 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.25 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

Stage 2: Determination of Intrinsic Value

OXY value chart August 2016

EPSmg -$1.33
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth -$19.32
MG Value based on 0% Growth -$11.33
Market Implied Growth Rate -32.97%
Current Price $76.54
% of Intrinsic Value N/A

Occidental Petroleum Corporation does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $6.25 in 2012 to an estimated $-1.33 for 2016. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Occidental Petroleum Corporation revealed the company was trading above its Graham Number of $0. The company pays a dividend of $3 per share, for a yield of 3.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was -57.43, which was below the industry average of 55.24, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-13.52.

Occidental Petroleum Corporation scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

OXY charts August 2016

Net Current Asset Value (NCAV) -$13.52
Graham Number $0.00
PEmg -57.43
Current Ratio 1.70
PB Ratio 2.53
Current Dividend $3.00
Dividend Yield 3.92%
Number of Consecutive Years of Dividend Growth 14

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2016
Total Current Assets $8,972,000,000
Total Current Liabilities $5,267,000,000
Long-Term Debt $8,331,000,000
Total Assets $42,395,000,000
Intangible Assets $0
Total Liabilities $19,294,000,000
Shares Outstanding (Diluted Average) 763,600,000

Earnings Per Share History

Next Fiscal Year Estimate -$0.35
Dec2015 -$10.23
Dec2014 $0.79
Dec2013 $7.32
Dec2012 $5.67
Dec2011 $8.32
Dec2010 $5.56
Dec2009 $3.58
Dec2008 $8.34
Dec2007 $6.44
Dec2006 $4.87
Dec2005 $6.48
Dec2004 $2.80
Dec2003 $1.98
Dec2002 $1.31
Dec2001 $1.55
Dec2000 $2.13
Dec1999 $0.62
Dec1998 $0.50
Dec1997 -$0.72
Dec1996 $0.87

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate -$1.33
Dec2015 -$0.42
Dec2014 $4.83
Dec2013 $6.60
Dec2012 $6.25
Dec2011 $6.51
Dec2010 $5.66
Dec2009 $5.79
Dec2008 $6.52
Dec2007 $5.25
Dec2006 $4.26
Dec2005 $3.58
Dec2004 $2.07
Dec2003 $1.64
Dec2002 $1.39
Dec2001 $1.23
Dec2000 $0.94

Recommended Reading:

Other ModernGraham posts about the company

Occidental Petroleum Corporation – 2015 Update $OXY
21 Companies in the Spotlight This Week – June 14, 2014
Occidental Petroleum Corp Annual Valuation – 2014 $OXY
19 Companies in the Spotlight This Week – 3/15/14
Occidental Petroleum Corp (OXY) Quarterly Valuation

Other ModernGraham posts about related companies

Chevron Corp Valuation – August 2016 $CVX
Exxon Mobil Corporation Valuation – August 2016 $XOM
National-Oilwell Varco Inc Valuation – August 2016 $NOV
Newfield Exploration Co Valuation – August 2016 $NFX
EOG Resources Inc Valuation – July 2016 $EOG
Noble Corp PLC Valuation – July 2016 $NE
Baker Hughes Inc Valuation – July 2016 $BHI
Rowan Companies PLC Valuation – July 2016 $RDC
ConocoPhillips Valuation – July 2016 $COP
Devon Energy Corp Valuation – July 2016 $DVN

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Occidental Petroleum Corporation – 2015 Update $OXY

300px-Occidental_Logo.svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Most Undervalued Companies for the Defensive Investor – May 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Occidental Petroleum Corporation (OXY) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Occidental Petroleum Corporation (Occidental) is engaged in the oil and gas exploration and production. The Company, through its subsidiaries and affliates, operates in the United States, Middle East/North Africa and Latin America. Occidental operates through three segments. The oil and gas segment explores for, develops and produces oil and condensate, natural gas liquids (NGL) and natural gas. The chemical (OxyChem) segment manufactures and markets basic chemicals and vinyls. The midstream, marketing and other segment (midstream and marketing) gathers, processes, transports, stores, purchases and markets oil, condensate, NGLs, natural gas, carbon dioxide (CO2) and power. It also trades around its assets, including transportation and storage capacity, and trades oil, NGLs, gas and other commodities.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 4/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 3/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – FAIL

Valuation Summary

Key Data:

Recent Price $78.77
MG Value $0.00
MG Opinion Overvalued
Value Based on 3% Growth $45.95
Value Based on 0% Growth $26.93
Market Implied Growth Rate 8.18%
Net Current Asset Value (NCAV) -$11.42
PEmg 24.86
Current Ratio 1.51
PB Ratio 1.77

Balance Sheet – March 2015

Current Assets $10,434,000,000
Current Liabilities $6,915,000,000
Total Debt $6,139,000,000
Total Assets $53,389,000,000
Intangible Assets $0
Total Liabilities $19,225,000,000
Outstanding Shares 769,600,000

Earnings Per Share

2015 (estimate) $0.55
2014 $0.79
2013 $7.32
2012 $5.67
2011 $8.32
2010 $5.56
2009 $3.58
2008 $8.34
2007 $6.44
2006 $4.87
2005 $6.48

Earnings Per Share – ModernGraham

2015 (estimate) $3.17
2014 $4.83
2013 $6.60
2012 $6.25
2011 $6.51
2010 $5.66

Dividend History

Conclusion:

Occidental Petroleum is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, the insufficient earnings growth over the last ten years, and the high PEmg ratio.  The Enterprising Investor is concerned with the level of debt relative to the current assets, and the lack of earnings growth over the last five years.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  As for a valuation, the company appears to be overvalued after seeing its EPSmg (normalized earnings) drop from $6.51 in 2011 to only an estimated $3.17 for 2015.  This level of demonstrated earnings growth does not support the market’s implied estimate of 8.18% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value well below the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Occidental Petroleum (OXY)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Occidental Petroleum Corp Annual Valuation – 2014 $OXY

300px-Occidental_Logo.svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Undervalued Companies for the Defensive Investor Near 52 Week Lows.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Occidental Petroleum (OXY) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Occidental Petroleum Corporation (Occidental) conducts its operations through various subsidiaries and affiliates. The Company operates in three segments: oil and gas segment; chemical segment, and midstream, marketing and other segment. The oil and gas segment explores for, develops and produces oil and condensate, natural gas liquids (NGLs) and natural gas. The chemical segment (OxyChem) mainly manufactures and markets basic chemicals and vinyls. The midstream, marketing and other segment (midstream and marketing) gathers, processes, transports, stores, purchases and markets oil, condensate, NGLs, natural gas, carbon dioxide (CO2) and power. It also trades around its assets, including transportation and storage capacity, and trades oil, NGLs, gas and other commodities. The segment also invests in entities that conduct similar activities. On December 31, 2012, it acquired Eagle Ford Shale.

OXY Chart

OXY data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 5/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 – PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 3/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – FAIL
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $99.98
MG Value $94.98
MG Opinion Fairly Valued
Value Based on 3% Growth $97.27
Value Based on 0% Growth $57.02
Market Implied Growth Rate 3.20%
Net Current Asset Value (NCAV) -$19.57
PEmg 14.90
Current Ratio 1.33
PB Ratio 1.83

Balance Sheet – 3/31/2014

Current Assets $10,899,000,000
Current Liabilities $8,190,000,000
Total Debt $6,877,000,000
Total Assets $69,275,000,000
Intangible Assets $0
Total Liabilities $26,277,000,000
Outstanding Shares 785,610,000

Earnings Per Share

2014 (estimate) $6.44
2013 $7.34
2012 $5.71
2011 $8.16
2010 $5.61
2009 $3.59
2008 $8.33
2007 $6.05
2006 $5.15
2005 $6.45
2004 $3.25

Earnings Per Share – ModernGraham

2014 (estimate) $6.71
2013 $6.59
2012 $6.24
2011 $6.45
2010 $5.64
2009 $5.74

Dividend History

OXY Dividend Chart

OXY Dividend data by YCharts

Conclusion:

Occidental Petroleum Corp is no longer suitable for the Defensive Investor or the Enterprising Investor.  The company has shown a lack of sufficient earnings growth over the last ten years, which when combined with the low current ratio, disqualifies it from the Defensive Investor’s portfolio.  The Enterprising Investor also has concerns with the high level of debt relative to current assets.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should seek other opportunities through a review of ModernGraham’s valuation of Chevron Corp (CVX) and ModernGraham’s valuation of Exxon Mobil (XOM).  From a valuation side of things, the company appears to be fairly valued after having grown its EPSmg (normalized earnings) from $5.64 in 2010 to an estimated $6.71 for 2014.  This demonstrated level of growth is enough to support the market’s implied estimate of 3.20% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value within a margin of safety relative to the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Occidental Petroleum (OXY)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Be sure to review the previous ModernGraham Valuations of Occidental Petroleum (OXY)!

Disclaimer:  The author did not hold a position in Occidental Petroleum (OXY) or any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.

Logo taken from wikipedia; this article is not affiliated with the company in any manner.

Occidental Petroleum Corp (OXY) Quarterly Valuation

300px-Occidental_Logo.svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Occidental Petroleum fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Occidental Petroleum Corporation (Occidental) conducts its operations through various subsidiaries and affiliates. The Company operates in three segments: oil and gas segment; chemical segment, and midstream, marketing and other segment. The oil and gas segment explores for, develops and produces oil and condensate, natural gas liquids (NGLs) and natural gas. The chemical segment (OxyChem) mainly manufactures and markets basic chemicals and vinyls. The midstream, marketing and other segment (midstream and marketing) gathers, processes, transports, stores, purchases and markets oil, condensate, NGLs, natural gas, carbon dioxide (CO2) and power. It also trades around its assets, including transportation and storage capacity, and trades oil, NGLs, gas and other commodities. The segment also invests in entities that conduct similar activities. On December 31, 2012, it acquired Eagle Ford Shale.

OXY Chart

OXY data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 6/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 3/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – FAIL
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $97.15
MG Value $85.04
MG Opinion Overvalued
Value Based on 3% Growth $95.54
Value Based on 0% Growth $56.00
Market Implied Growth Rate 3.12%
Net Current Asset Value (NCAV) -$16.85
PEmg 14.75
Current Ratio 1.34
PB Ratio 2.00

Balance Sheet – 12/31/2013

Current Assets $11,323,000,000
Current Liabilities $8,434,000,000
Total Debt $6,939,000,000
Total Assets $69,443,000,000
Intangible Assets $0
Total Liabilities $26,317,000,000
Outstanding Shares 889,920,000

Earnings Per Share

2013 $7.34
2012 $5.71
2011 $8.16
2010 $5.61
2009 $3.59
2008 $8.33
2007 $6.05
2006 $5.15
2005 $6.45
2004 $3.25
2003 $2.06
2002 $1.56

Earnings Per Share – ModernGraham 

2013 $6.59
2012 $6.24
2011 $6.45
2010 $5.64
2009 $5.74
2008 $6.50

Dividend History

OXY Dividend Chart

OXY Dividend data by YCharts

Conclusion:

Occidental Petroleum is a company that Defensive Investors and Enterprising Investors should all keep on their watch lists.  The company qualifies for the Defensive Investor having passed all of the investor type’s requirements except the current ratio.  The company also qualifies for the Enterprising Investor by default, despite having a high level of debt relative to its current assets.  As a result, value investors seeking to follow the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and its competitors, including a review of both ModernGraham’s valuation of Chevron Corporation (CVX) and ModernGraham’s valuation of Exxon Mobil (XOM).  From a valuation perspective, the company appears to be slightly overvalued.  It has grown its EPSmg (normalized earnings) from $5.74 in 2009 to $6.59 for 2013, but this level of growth does not support the market’s implied estimate of 3.12% earnings growth.  The ModernGraham valuation model accordingly returns an estimate of intrinsic value that falls below the market’s current price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Occidental Petroleum (OXY)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

If you like our valuations, why not check out ModernGraham Stocks & Screens?  It’s a great way to review the valuations while screening for things like low PE ratio, undervalued companies, etc.!

Disclaimer:  The author did not hold a position in Occidental Petroleum (OXY) or any of the other companies listed in this article at the time of publication and had no intention of changing that position within the next 72 hours.

Logo taken from the Wikipedia; this article is not affiliated with the company in any manner.

Valuation: Occidental Petroleum (OXY) is Defensive but Overvalued

moneyCompany Profile (obtained from Google Finance): Occidental Petroleum Corporation (Occidental) conducts its operations through various subsidiaries and affiliates. The Company operates in three segments: oil and gas segment; chemical segment, and midstream, marketing and other segment. The oil and gas segment explores for, develops and produces oil and condensate, natural gas liquids (NGLs) and natural gas. The chemical segment (OxyChem) mainly manufactures and markets basic chemicals and vinyls. The midstream, marketing and other segment (midstream and marketing) gathers, processes, transports, stores, purchases and markets oil, condensate, NGLs, natural gas, carbon dioxide (CO2) and power. It also trades around its assets, including transportation and storage capacity, and trades oil, NGLs, gas and other commodities. The segment also invests in entities that conduct similar activities. On December 31, 2012, it acquired Eagle Ford Shale.

Defensive and Enterprising Investor Tests (What is the significance of these tests, and what is PEmg ratio?):

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 6/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 3/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – FAIL
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary (Explanation of the ModernGraham Valuation Model)

Key Data:

MG Value $78
MG Opinion Overvalued
Value Based on 3% Growth $93
Value Based on 0% Growth $55
Market Implied Growth Rate 3.09%
Net Current Asset Value (NCAV) -$18.25
PEmg 14.68
Current Ratio 1.35
PB Ratio 1.78

Balance Sheet – 9/30/2013 

Current Assets $11,938,000,000
Current Liabilities $8,842,000,000
Total Debt $6,961,000,000
Total Assets $69,437,000,000
Intangible Assets $0
Total Liabilities $26,647,000,000
Outstanding Shares 806,060,000

Earnings Per Share – Diluted

2013 (estimate) $6.90
2012 $5.71
2011 $8.16
2010 $5.61
2009 $3.59
2008 $8.33
2007 $6.05
2006 $5.15
2005 $6.45
2004 $3.25
2003 $2.06
2002 $1.56

Earnings Per Share – Modern Graham (Calculating EPSmg)

2013 (estimate) $6.44
2012 $6.24
2011 $6.45
2010 $5.64
2009 $5.74
2008 $6.50

Conclusion:

Occidental Petroleum is a solid company based on its financial history.  The company passes all of the requirements for the Defensive Investor, except for the current ratio requirement.  As a result, the company is by default also suitable for the Enterprising Investor.  The company’s earnings have fluctuated significantly from year to year, but the overall trend is one of slow growth.  From a valuation standpoint, the market is currently implying a growth rate of 3.09%, which is a little higher than what’s been seen during the historical period we’ve reviewed.  As a result, based on the historical achievements of Occidental Petroleum, the market price seems slightly overvalued right now.  However, Defensive Investors and Enterprising Investors alike should keep the company on a watch list to see if the price becomes a little more attractive.  When it does, those investors should feel comfortable conducting further research to determine whether Occidental Petroleum is right for their individual portfolios.

What do you think?  Do you agree that Occidental Petroleum is overvalued?  Is the company suitable for either Defensive Investors or Enterprising Investors?  Leave a comment or mention @ModernGraham on Twitter to discuss.

If you like our valuations, why not check out ModernGraham Stocks & Screens?  It’s a great way to review the valuations while screening for things like low PE ratio, undervalued companies, etc.!

Disclaimer:  The author did not hold a position in Nucor at the time of publication and had no intention of entering into a position within the next 72 hours.

Photo Credit:  Andrew Magill

Marriott International Inc Valuation – January 2019 $MAR

Company Profile (excerpt from Reuters): Marriott International, Inc. (Marriott International), incorporated on September 19, 1997, is a lodging company. As of December 31, 2017, the Company operated, franchised, or licensed 6,520 properties across the world, with 1,257,666 rooms. Marriott International operates in three business segments: North American Full-Service, North American Limited-Service and International. Its North American Full-Service segment includes its Luxury and Premium brands (JW Marriott, The Ritz-Carlton, W Hotels, The Luxury Collection, St. Regis, EDITION, Marriott Hotels, Westin, Renaissance Hotels, Le Meridien, Autograph Collection Hotels, Delta Hotels, Gaylord Hotels, and Tribute Portfolio) located in the United States and Canada. Its North American Limited-Service segment includes Select brands (Courtyard, Residence Inn, Fairfield Inn & Suites, SpringHill Suites, Four Points, TownePlace Suites, Aloft Hotels, AC Hotels by Marriott, Element Hotels, and Moxy Hotels) located in the United States and Canada. Its International segment includes JW Marriott, The Ritz-Carlton, W Hotels, The Luxury Collection, St. Regis, EDITION, Bulgari Hotels & Resorts, Marriott Hotels, Westin, Renaissance Hotels, Le Meridien, Autograph Collection Hotels, Marriott Executive Apartments, Tribute Portfolio, Courtyard, Residence Inn, Fairfield Inn & Suites, Four Points, Aloft Hotels, AC Hotels by Marriott, Protea Hotels, Element Hotels, and Moxy Hotels located outside the United States and Canada. It also operates, markets, and develops residential properties and provides services to home/condominium owner associations.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MAR – January 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $37,827,905,491 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.46 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 1363.29% Pass
6. Moderate PEmg Ratio PEmg < 20 28.80 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 16.73 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.46 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -2.68 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.85
MG Growth Estimate 15.00%
MG Value $148.23
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $55.83
MG Value based on 0% Growth $32.73
Market Implied Growth Rate 10.15%
Current Price $110.89
% of Intrinsic Value 74.81%

Marriott International Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.88 in 2014 to an estimated $3.85 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 10.15% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Marriott International Inc revealed the company was trading above its Graham Number of $35.23. The company pays a dividend of $1.29 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 28.8, which was below the industry average of 29.4, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-53.35.

Marriott International Inc receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$53.35
Graham Number $35.23
PEmg 28.80
Current Ratio 0.46
PB Ratio 16.73
Current Dividend $1.29
Dividend Yield 1.16%
Number of Consecutive Years of Dividend Growth 8

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $2,803,000,000
Total Current Liabilities $6,051,000,000
Long-Term Debt $8,710,000,000
Total Assets $23,833,000,000
Intangible Assets $17,470,000,000
Total Liabilities $21,509,000,000
Shares Outstanding (Diluted Average) 350,600,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.31
Dec2017 $3.61
Dec2016 $2.64
Dec2015 $3.15
Dec2014 $2.54
Dec2013 $2.00
Dec2012 $1.72
Dec2011 $0.55
Dec2010 $1.21
Dec2009 -$0.97
Dec2008 $0.98
Dec2007 $1.73
Dec2006 $1.40
Dec2005 $1.43
Dec2004 $1.23
Dec2003 $1.01
Dec2002 $0.54
Dec2001 $0.46
Dec2000 $0.93
Dec1999 $0.74
Dec1998 $0.72

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.85
Dec2017 $3.01
Dec2016 $2.61
Dec2015 $2.39
Dec2014 $1.88
Dec2013 $1.33
Dec2012 $0.90
Dec2011 $0.56
Dec2010 $0.66
Dec2009 $0.57
Dec2008 $1.34
Dec2007 $1.47
Dec2006 $1.26
Dec2005 $1.11
Dec2004 $0.91
Dec2003 $0.75
Dec2002 $0.64

Recommended Reading:

Other ModernGraham posts about the company

Marriott International Inc Valuation – March 2018 $MAR
Marriott International Inc Valuation – July 2016 $MAR
24 Companies in the Spotlight This Week – 3/28/15
Marriott International Inc. Annual Valuation – 2015 $MAR
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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Inogen Inc Valuation – July 2018 $INGN

Company Profile (excerpt from Reuters): Inogen, Inc., incorporated on November 27, 2001, is a medical technology company. The Company develops, manufactures and markets portable oxygen concentrators used to deliver supplemental long-term oxygen therapy to patients suffering from chronic respiratory conditions. The Company’s Inogen One systems concentrate the air around the patient to offer a single source of supplemental oxygen anytime, anywhere with a portable device. Its three portable product offerings, the Inogen One G4, Inogen One G3 and Inogen One G2, at approximately 2.8, 4.8 and 7.0 pounds with a single battery, respectively. Its Inogen One G4, Inogen One G3 and Inogen One G2 are sub-3, sub-5 and sub-10 pound portable oxygen concentrators, respectively. All of its Inogen One systems are equipped with Intelligent Delivery Technology. The Inogen At Home stationary oxygen concentrator allows it to access the non-ambulatory oxygen patient market and serves as a backup to its Inogen One system for ambulatory patients on its rental service.

Downloadable PDF version of this valuation:

ModernGraham Valuation of INGN – July 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $4,523,365,268 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 6.67 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 12100.00% Pass
6. Moderate PEmg Ratio PEmg < 20 190.10 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 19.29 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 6.67 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.12
MG Growth Estimate 15.00%
MG Value $43.17
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $16.26
MG Value based on 0% Growth $9.53
Market Implied Growth Rate 90.80%
Current Price $213.16
% of Intrinsic Value 493.75%

Inogen Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the lack of dividends. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $0.29 in 2014 to an estimated $1.12 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 90.8% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Inogen Inc revealed the company was trading above its Graham Number of $20.52. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 190.1, which was above the industry average of 39.79. Finally, the company was trading above its Net Current Asset Value (NCAV) of $8.86.

Inogen Inc receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $8.86
Graham Number $20.52
PEmg 190.10
Current Ratio 6.67
PB Ratio 19.29
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $251,054,000
Total Current Liabilities $37,667,000
Long-Term Debt $0
Total Assets $299,882,000
Intangible Assets $6,886,000
Total Liabilities $53,545,000
Shares Outstanding (Diluted Average) 22,295,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.73
Dec2017 $0.96
Dec2016 $0.97
Dec2015 $0.56
Dec2014 $0.30
Dec2013 $0.68
Dec2012 $0.04

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.12
Dec2017 $0.78
Dec2016 $0.63
Dec2015 $0.41
Dec2014 $0.29
Dec2013 $0.24
Dec2012 $0.01

Recommended Reading:

Other ModernGraham posts about the company

Inogen Inc Valuation – Initial Coverage $INGN

Other ModernGraham posts about related companies

Tenet Healthcare Corp Valuation – June 2018 $THC
Universal Health Services Inc Valuation – June 2018 $UHS
Dentsply Sirona Inc Valuation – June 2018 $XRAY
IDEXX Laboratories Inc Valuation – June 2018 $IDXX
Hologic Inc Valuation – June 2018 $HOLX
Mettler-Toledo International Inc Valuation – June 2018 $MTD
Envision Healthcare Corp Valuation – June 2018 $EVHC
DaVita Inc Valuation – June 2018 $DVA
Danaher Corp Valuation – May 2018 $DHR
Agilent Technologies Inc Valuation – May 2018 $A

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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