Open main menu
Home
Random
Donate
Recent changes
Special pages
Community portal
Preferences
About Stockhub
Disclaimers
Search
User menu
Talk
Contributions
Create account
Log in
Editing
BP p.l.c.
(section)
Warning:
You are not logged in. Your IP address will be publicly visible if you make any edits. If you
log in
or
create an account
, your edits will be attributed to your username, along with other benefits.
Anti-spam check. Do
not
fill this in!
== '''<u>Valuations</u>''' == === WACC === {| class="wikitable" |+WACC Calculation | '''Risk Free Rate of Return''' |4.5%<ref>UK 10 Year Gilt Yield - https://markets.ft.com/data/bonds/tearsheet/summary?s=UK10YG (as of 11th August 2023).</ref> |- | '''Beta''' |1.17<ref name=":3">https://markets.ft.com/data/equities/tearsheet/summary?s=BP.:LSE</ref> |- | '''Market Rate of Return''' |7.4%<ref>https://www.ig.com/uk/trading-strategies/what-are-the-average-returns-of-the-ftse-100--230511</ref> |- | '''Cost of Equity''' |'''7.9%''' |- | '''Credit Spread''' |1.42%<ref>https://www.bp.com/en/global/corporate/investors/debt-investors-information.html</ref> |- | '''Cost of Debt''' |'''3.3%''' |- |'''Shares Outstanding''' |17,270.00<ref name=":2" /> |- |'''Share Price''' |$ 6.13<ref name=":3" /> |- | '''Equity''' |'''105,865.10''' |- |'''Total Debt''' |60,699.00 |- |'''Weighted Average Maturity''' |14.00<ref name=":2" /> |- |'''Interest Expense''' |1,632.00<ref name=":2" /> |- | '''Debt''' |'''56,422.10''' |- | '''E/D+E''' |65.2% |- | '''D/D+E''' |34.8% |- | '''WACC''' |'''5.8%''' |} The WACC for bp used in the DCF valuation was 5.8%, note the share price is of bp on it's primary listing, the London stock exchange. The share price used was at market close on 11/08/2023. The price has been converted from GBP to USD for ease of calculation. === DCF === Units are in $ millions. {| class="wikitable" |'''Units ($m)''' |'''2023''' |'''2024''' |'''2025''' |'''2026''' |'''2027''' |'''2028''' |'''2029''' |'''2030''' |'''2031''' |'''2032''' |- | '''FCF''' |'''25,351.15''' |'''15,847.60''' |'''16,411.76''' |'''14,908.14''' |'''15,390.58''' |'''13,804.90''' |'''14,204.97''' |'''12,536.66''' |'''12,853.86''' |'''11,102.46''' |- |Discount Factor |0.9783 |0.9248 |0.8741 |0.8262 |0.7810 |0.7382 |0.6978 |0.6596 |0.6234 |0.5893 |- |'''Present Value of FCF''' |'''24,801.88''' |'''14,655.09''' |'''14,345.57''' |'''12,317.54''' |'''12,019.69''' |'''10,190.83''' |'''9,911.85''' |'''8,268.64''' |'''8,013.52''' |'''6,542.55''' |} The effective tax rate used in all calculations was set at 44%, the terminal growth rate was set at 2.3%, equivalent to the annual FTSE 100 rate of return. The following table shows the result of the 10 year DCF valuation of bp. {| class="wikitable" |+DCF | '''Growth Rate''' |'''2.3%''' |- | '''Terminal Value''' |'''325,041.40''' |- |'''Present Value of Terminal Value''' |'''191,543.05''' |- |'''Enterprise Value''' |'''312,610.21''' |- |'''Equity Value''' |'''281,496.21''' |- |'''Share Price''' |'''$ 16.30''' |} The DCF calculation results in an implied share price of $16.30, indicating that the company and stock is undervalued. There is a potential upside of 103%, or an annualised share price gain of 10.3%. The following table shows a sensitivity analysis carried out to show share price behaviour in a range of WACC and growth rate environments. {| class="wikitable" |+Sensitivity Analysis |'''$ 16.30''' | colspan="10" |'''WACC''' |- | rowspan="8" |'''Growth Rate''' | |'''4.0%''' |'''4.5%''' |'''5.0%''' |'''5.5%''' |'''6.0%''' |'''6.5%''' |'''7.0%''' |'''7.5%''' |'''8.0%''' |- |'''1.0%''' |$ 20.67 |$ 17.83 |$ 15.68 |$ 14.01 |$ 12.67 |$ 11.57 |$ 10.65 |$ 9.86 |$ 9.19 |- |'''1.5%''' |$ 23.76 |$ 19.94 |$ 17.21 |$ 15.15 |$ 13.55 |$ 12.26 |$ 11.20 |$ 10.31 |$ 9.56 |- |'''2.0%''' |$ 28.38 |$ 22.90 |$ 19.24 |$ 16.62 |$ 14.64 |$ 13.10 |$ 11.86 |$ 10.84 |$ 9.99 |- |'''2.5%''' |$ 36.09 |$ 27.35 |$ 22.09 |$ 18.57 |$ 16.05 |$ 14.15 |$ 12.67 |$ 11.48 |$ 10.50 |- |'''3.0%''' |$ 51.51 |$ 34.75 |$ 26.36 |$ 21.31 |$ 17.93 |$ 15.51 |$ 13.68 |$ 12.26 |$ 11.11 |- |'''3.5%''' |$ 97.78 |$ 49.57 |$ 33.47 |$ 25.41 |$ 20.56 |$ 17.31 |$ 14.98 |$ 13.23 |$ 11.86 |- |'''4.0%''' | - |$ 94.01 |$ 47.70 |$ 32.25 |$ 24.50 |$ 19.84 |$ 16.72 |$ 14.48 |$ 12.80 |} === Relative Valuation === The following table compares bp to it's major competitors in the oil and gas industry globally. {| class="wikitable" |+Comparable Company Analysis |'''Company''' |'''P/E''' |'''EPS''' |'''Dividend''' |'''Dividend Yield''' |'''Dividend Growth''' |'''ROE''' |'''ROA''' |'''ROI''' |- |'''bp''' |x4.04 |$0.15 |$0.24 |0.08% | -9.55% |29.92% |7.44% |12.08% |- |'''Shell''' |x5.29 |$5.71 |$1.04 |0.06% | -11.21% |15.22% |6.78% |9.10% |- |'''Exxon''' |x8.38 |$13.25 |$3.55 |5.40% |3.02% |27.47% |14.56% |18.54% |- |'''Chevron''' |x8.97 |$18.28 |$5.68 |4.37% |5.63% |19.35% |11.86% |13.78% |- |'''Total''' |x7.84 |$7.85 |$4.08 |7.06% |6.51% |16.70% |6.50% |10.29% |- |'''China Pet. Corp.''' |x10.63 |$0.08 |$0.05 |7.72% | -6.62% |7.97% |3.58% |6.19% |- |'''Petrobras''' |x2.12 |$2.91 |$3.36 |18.99% | - |40.03% |15.74% |18.82% |- |'''Equinor''' |x3.38 |$9.03 |$2.9 |0.52% |26.64% |52.93% |16.48% |22.71% |} [[File:PE Ratio bp.png|center|thumb|642x642px]] Compared to the industry average of x6.33, bp has a lower price to earnings ratio of x4.04, indicating that the stock is undervalued. [[File:EPS bp.png|center|thumb|643x643px]] Compared to the industry average earnings per share of $7.16, bp has significantly lower earnings at $0.15 per share. This indicates that the company is not as profitable as some of it's peers. [[File:Dividend bp.png|center|thumb|642x642px]] The dividend paid out by bp over the previous 5 years is $0.24, which is again lower than most of it's competitors, this indicates that bp stock does not have good prospects for income. [[File:Returns bp.png|center|thumb|637x637px]] Comparing the returns on equity, assets and investment, we can see that bp is about average, performing better than Shell, Total and China Petroleum Corporation overall. The relative valuation indicates that bp stock is undervalued compared to it's competitors, but this may be due to the fact that the company is not as profitable as others in the oil and gas industry.
Summary:
Please note that all contributions to Stockhub may be edited, altered, or removed by other contributors. If you do not want your writing to be edited mercilessly, then do not submit it here.
You are also promising us that you wrote this yourself, or copied it from a public domain or similar free resource (see
Stockhub:Copyrights
for details).
Do not submit copyrighted work without permission!
Cancel
Editing help
(opens in new window)