Is ConocoPhillips Fairly Valued?

by Trefis Team
-4.20%
Downside
65.48
Market
62.73
Trefis
COP
ConocoPhillips
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ConocoPhillips (NYSE: COP), one of the largest independent oil & gas companies, posted a strong set of results for its year ended December ’17. The company’s top line displayed significant improvement backed by a recovery in the commodities market and we expect this trend to continue over the next year. The Organization of Petroleum and Exporting Countries (OPEC) and Non-OPEC allies’ decision to extend its output cuts would continue to benefit ConocoPhillips and based on our current estimates, we expect the stock to be fairly valued $63, ~16% higher than the current market price. Additionally, the company’s ongoing cost reduction initiatives are expected to benefit its EBITDA margin throughout 2018.

Our price estimate is based on the assumption of $36.16 bil revenue in FY’18 and an EBITDA margin of ~18%. We expect a P/EBITDA Multiple of 11.91, slightly higher than that for FY’17. Average share count is estimated at 1.2 bil.

Our revenue estimate of $36.16 bil for 2018 is arrived at by projecting revenues for each individual segment. Expected sales volume for each of the divisions is multiplied by the expected average price to arrive at the segment-wise revenue figures.

Detailed steps to arrive at our price estimate are outlined in our interactive dashboardYou can modify our assumptions to arrive at your own price estimate for the company.

 

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