Sunday, February 25, 2007

Conoco Phillips update

In a previous article we looked at Conoco Phillips fundamentals and found it to be a value play among the energy players.

We will quickly take a look at the stock in light of the latest 10-K filing and see how the changes look like.

First the balance sheets and cash flow overview. The debt carried on the balance sheet declined by 4 billion to $23 billion. The book value per share increased to $50.5. The ratio of the current market value to book value is 1.33 for COP. This compares to 3.76 for Exxon Mobil, 2.29 for Chevron and ~3 for Petro China. In my opinion, this makes COP a screaming buy among the oil majors today.

For the year, COP spent 925 million dollars buying back stock and issues 2.25 billion in dividends. The plan of buying back stock makes the most sense as the stock is undervalued at the moment.

In this year, we expect COP to continue to pay down debt while buying back stock and increasing dividends. The debt should go down from the current 23 billion levels to below 20 billion level probably to 17-18 billion. This should lead to increases in book value of the company to 53 to 54 dollars a share all else being equal. This should help the stock break the $70 barrier and stay there.

1 comment:

Mark said...

hey its mr walstreet from vin. I've heard debate about the validity of book value in analysis. some say it's simply an accounting thing. I don't think bookvalue is great alone in company analysis as companies trade below book for years and are really not undervalued.