As of July 24, 2023, Chevron Corp (CVX, Financial) is experiencing a gain of 3.16%, with its stock price standing at $163.7. With a market cap of $306 billion and sales of $232.2 billion, Chevron's financial metrics are robust. The GF Value, a unique indicator of a stock's intrinsic worth, places Chevron's value at $183.4, suggesting that it is modestly undervalued.
Chevron is a globally integrated energy company involved in exploration, production, and refining operations. As the second-largest oil company in the United States, it produces 3.0 million barrels of oil equivalent a day, including 7.7 million cubic feet a day of natural gas and 1.7 million barrels of liquids a day. Chevron's operations span North America, South America, Europe, Africa, Asia, and Australia, with refining capacities in the U.S. and Asia.
GF Value of Chevron Corp (CVX, Financial)
The GF Value of Chevron (CVX) is estimated based on historical trading multiples, an internal adjustment from GuruFocus based on past business growth, and analyst estimates of future business performance. If the share price significantly surpasses the GF Value Line, the stock may be overvalued, leading to poor future returns. Conversely, if the share price is considerably below the GF Value, the stock may be undervalued, promising higher future returns. At its current price of $163.7 per share, Chevron's stock appears to be modestly undervalued.
Given Chevron's undervaluation, the long-term return of its stock is likely to exceed its business growth.
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Financial Strength of Chevron
Investing in companies with poor financial strength can lead to a higher risk of permanent capital loss. Therefore, it's crucial to scrutinize a company's financial strength before deciding to buy its stock. Chevron's cash-to-debt ratio stands at 0.68, outperforming 52.98% of companies in the Oil & Gas industry. GuruFocus ranks Chevron's overall financial strength at 8 out of 10, indicating strong financial health.
Chevron's Profitability
Investing in profitable companies, especially those demonstrating consistent long-term profitability, poses less risk. Chevron has been profitable 8 out of the past 10 years. With a revenue of $232.2 billion and Earnings Per Share (EPS) of $18.52 over the past twelve months, its operating margin of 17.43% ranks better than 62.81% of companies in the Oil & Gas industry. GuruFocus ranks Chevron's profitability at 7 out of 10.
Growth of Chevron
Growth is a vital factor in the valuation of a company. Companies that grow faster create more value for shareholders, especially if the growth is profitable. Chevron's average annual revenue growth is 18.1%, outperforming 65.89% of companies in the Oil & Gas industry. Its 3-year average EBITDA growth is 22.4%, ranking better than 60.71% of companies in the same industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) and the weighted average cost of capital (WACC) provides another perspective on profitability. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. The WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. Chevron’s ROIC is 13.86, surpassing its WACC of 9.18.
Conclusion
In conclusion, the stock of Chevron Corp (CVX, Financial) appears to be modestly undervalued. The company's financial condition is strong, its profitability is fair, and its growth ranks better than 60.71% of companies in the Oil & Gas industry. To learn more about Chevron stock, you can check out its 30-Year Financials here.
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