Is Occidental Petroleum Stock A Real Bargain?
Shares of Occidental Petroleum (OXY) currently trade at 8.0 times earnings (as of October 7, 2026). That is a steep discount to the 21.5 multiple of the S&P 500. The valuation remains depressed even after the stock delivered a 31% return over the past twelve months. A ratio this cheap typically points to one of two things: a solid enterprise trading at a discount, or a fair valuation for profits that the market expects will fade. So what does a buyer at 8 times earnings actually get?
Half Of Occidental’s Revenue Becomes Operating Cash Flow
Investors are buying an oil and gas producer that converted 50.6% of its revenue into operating cash flow over the last twelve months. The company relies almost entirely on pumping crude and natural gas to generate sales. Those core operations brought in $20.9 billion out of the $21.6 billion in revenue the company reported for fiscal 2025.
Occidental also operates with higher profitability than the broader market. The company posted a 27.1% operating margin over the last twelve months, clearing the S&P 500’s 18.5%. The stock’s discount extends to its cash generation as well. Shares currently trade at 5.3 times operating cash flow, while the S&P 500 trades at 14.4.
Occidental’s Revenue Fell For Three Straight Years
Recent performance paints a brighter picture than the prior three years. Occidental recorded a 7.3% increase in revenue over the last twelve months. Before this recent uptick, revenue fell during fiscal 2023, 2024, and 2025. The most severe decline occurred in fiscal 2023, when revenue as reported at the time fell 23%.
A single quarter drove the latest rebound. Revenue rose 53.4% from a year earlier in the most recent quarter, breaking a streak of declines across the preceding three quarters. During the August 6, 2026 earnings call, management noted that higher commodity prices and cost discipline lifted free cash flow before working capital in the second quarter.
This dynamic might explain the depressed valuation. Profits tied to energy prices can fall alongside them. Furthermore, the earnings behind that low multiple include a one-time item. Occidental completed the sale of its OxyChem chemicals business to Berkshire Hathaway on January 2, 2026, with an estimated after-tax gain of about $3.2 billion. That is why net income over the last twelve months, at $7.3 billion, exceeds operating income of $5.9 billion. Without the gain, the stock would trade at roughly 14 times earnings.
What Is Occidental Doing With Its Cash?
Occidental continues to direct cash toward debt reduction. On the August call, management told investors the company had cut principal debt by $1.5 billion since the previous quarterly update. The immediate corporate priority is to bring principal debt down to $10 billion.
Executives also outlined a plan to generate more than $4 billion in additional annual sustainable cash flow by 2030. Part of this strategy involves reducing the capital expenditures required to maintain flat production. Management stated that about 85% of these gains could be realized even if commodity prices drop significantly.
Shareholders hoping for buybacks will have to wait in the meantime. Management indicated that a continuous share buyback program remains a lower priority until Occidental redeems its preferred equity in August 2029.
What A Buyer Of Occidental Stock Is Betting On
Buying the stock at this price requires confidence that Occidental can preserve its cash when oil and gas prices fall. This position relies on the company fixing a real weakness, profits that fall when energy prices do, rather than assuming the broader market has misjudged a steady business. The cash generation is evident today, but the sustainability of profits from the last twelve months remains unproven. Only a period of lower prices can truly test the model. Management has set a cash flow target for 2030, but a more immediate test will be the $10 billion debt milestone. Third-quarter 2026 results with a principal debt balance below the $11.8 billion reported in August would show Occidental still paying debt down toward that milestone.
How To Act On OXY?
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