BP p.l.c. is unique among petroleum companies in that it also engages in the production and distribution of aluminum coils for the beverage industry. Appearing in the marketplace under two well known brand names; BP and AMOCO the company offers its crude and refined fuel products (including the byproducts) in a host of venues across the globe. Their products are marketed to both wholesale and retail customers
Investment Impacts (help)
UK Country Analysis ► (edit / improve) The UK (GBP) has a highly productive, capitalist economy with a strong financial services industry. Currency: The British Pound is slightly overvalued on a global basis. The purchase price parity indicates that the British Pound should fall in value over time. Investor Survey: The UK’s economic environment is very favorable for long term economic growth due to high scores on economic freedom, government transparency, and economic diversity. Trade: Belgium, India, the EU, Netherlands, and France are the top export partners, while the leading industry is financial services. Commodity: The UK produces a significant amount of natural gas and imports of cocoa for domestic consumption. SWOT Analysis: The leading UK strength is the London Stock Exchange, which aids the financial services industry. The main weaknesses include high consumer and fiscal deficits. Trading Strategy: An overvalued currency, moderate investment flow potential and very favorable business environment leads to a neutral outlook for UK investments.
Commodity Investment Analysis
Crude Oil Commodity Analysis ► (edit / improve) Crude oil is used to produce fuel oil and gasoline. Gasoline is the largest supplier of fuel for internal combustion engines. Commodity: Crude oil is rated a Sell. Crude oil demanders have a moderate potential to increase in value and crude oil suppliers have a very high potential to increase in value. Investor Survey: Crude oil’s long term growth potential is very favorable due to high scores on sensitivity to price changes, demand not sensitive to price changes, and the SWOT analysis. SWOT Analysis: Strength: Limited natural resource / supply; Weakness: Emits carbon dioxide. Opportunity to grow: the overall growth of vehicles will increase demand for crude oil; Threats to growth: environmental concerns could slow growth potential in the near term. Trading Strategy: The commodity analysis sell rating indicates that crude oil prices should decrease over the short term, whereas a very favorable investor survey means crude oil prices increase over the long term.
Natural Gas Commodity Analysis ► (edit / improve) Natural gas is a significant fuel source used to produce electricity in the world. It primarily consists of methane gas. Commodity: Natural is rated a hold. Natural gas demanders have a high potential to increase in value, while natural gas suppliers also have high potential in increase in value. Investor Survey: Natural gas’s long term growth potential is favorable due to high scores on difficulty to expand in the short term and sensitivity to price changes. SWOT Analysis: Strength: Natural gas is a cheap fuel source, especially in the US; Weakness: natural gas produces considerable pollution. Opportunity to grow: natural gas could produce hydrogen fuel, which is a substitute for gas in cars; Threats to growth: alternative forms of clean energy may compete with natural gas. Trading Strategy: The commodity analysis hold rating indicates that natural gas should stay the same price over the short term, whereas a moderately favorable investor survey means natural gas should increase in price over the long term.
Industry Analysis evaluates the major industry characteristics that affect investments. Company specific factors drive the performance of individual companies, but macro-economic factors can affect the performance, stock prices, growth rates, and chart movements of any stock, currency, or commodity. All stock traders should review industry research before trading.
Warren Buffett Quote: "When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact." No matter the quality of your business, industry economics is an important factor in any value investing decision.
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Value Investing Importance?
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Description: The energy stocks includes companies whose sales derive from the production and sale of energy related products and services such as the extraction, manufacturing, refining, and distribution of energy. Read More.
Profit Analysis: The best way to profit from energy stock investments is to find the most undervalued investments (Wall Street and Main Street buy ratings) during economic recessions. Those investments should be undervalued (see Wall Street on left side), and have high Main Street Common Sense investment ratings (see Main Street on right side). When an economic recovery occurs, energy stocks tend to outperform the general stock market, because general consumer demand increases.
Energy stocks are most sensitive to commodity prices, which are an indicator of future energy demand. Energy commodity speculators try to predict the demand and supply of commodities, but their generally set prices too high during economic expansions and too low during economic recessions. Therefore, the best time to make energy stock investments is during economic recessions. The best time to sell energy stocks is in the late stages of economic expansions, when energy stocks and commodity prices are above their fair prices. Expensive (overvalued) stocks with low Main Street Common Sense ratings should be sold at any time to invest in better stocks. Two buys ratings are the best and two sell ratings are the worst possible stock investments.
Trading Strategy: The energy stocks tends to be very sensitive to economic changes. Demand for energy is inelastic, so it does not easily change with changes in price. Therefore, changes in supply have a large impact on the price of fuel. Some sectors of the energy stocks require large investments over an extended period of time, which causes issues with adjusting energy supply with demand, so prices tend to be volatile. Energy stock prices tend to move in line with energy commodity prices. During economic recessions, consumers may decrease expenses slightly, but the majority of energy costs are not flexible, because they are needed for everyday living.
Since energy needs are inflexible, stock prices are less influenced by changed in the economy. However, commodity prices such as oil or natural gas have a direct impact on energy stock investments. Changes in commodity prices are a result of changes in supply and demand. Recently, oil prices increased, because of the demand for oil from emerging markets. Unfortunately, the global recession decreased growth estimates and demand until oil prices fell from 160 dollars a barrel to 35 dollars a barrel.
Part of oil price changes are do to speculation. When speculators increase the price of oil, many alternative sources of fuel become profitable. When companies make investments in these alternative sources of fuel, supply increases until energy prices start to fall. If prices fall too far, then the alternative fuel sources become less profitable and shutdown, which decreases demand. Stock prices rise and fall with energy commodity prices.
| Energy Financial Statistics |
Stat |
Notes |
| Stock Research Rating |
Buy |
… |
| Potential (safety margin) |
64% |
High ~ Good for investors |
| WACC Discount Rate |
8% |
Low ~ Good for investors |
| Comparative Multiples |
Stat |
Notes |
| Revenue EV Multiple |
1.1x |
Low ~ Good for investors |
| EBITDA EV Multiple |
4.6x |
Low ~ Good for investors |
| EBIT EV Multiple |
5.5x |
Low ~ Good for investors |
| Cash Flow EV Multiple |
14.0x |
… |
| Book Value EV Multiple |
1.1x |
Low ~ Good for investors |
| Discounted Cash Flow |
Stat |
Notes |
| Revenue Growth |
21% |
High ~ Good for investors |
| EBITDA Margin |
28% |
High ~ Good for investors |
| EBIT Margin |
21% |
High ~ Good for investors |
| Cash Flow Margin |
5% |
… |
| Taxes Rate |
37% |
… |
| Debt-Equity Ratio |
22% |
Low ~ Good for investors |
| ROIC |
5% |
… |
| Reinvestment Rate |
15% |
… |
| WACC Discount Rate |
Stat |
Notes |
| Risk Free Rate |
4% |
Low ~ Good for Investors |
| Cost of Debt |
7% |
Low ~ Good for Investors |
| Equity Risk Premium |
5% |
… |
| Debt Required Return of Debt |
4% |
Low ~ Good for Investors |
| Required Return of Equity |
9% |
… |
1 WikiWealth only uses the largest 30 companies in each industry for the basis of these financial measures. Each statistic is the market weighted average of the 30 companies.
2 Investment potential (margin of safety) is a weighted average of the discounted cash flow (DCF), the enterprise value (EV) market multiple, and the Warren Buffett investment methods.
