In comparison to the rest of the oil and gas industry, BP is one of the most attractive investments on the market. BP's current position will appeal to investors interested in healthy dividends and potential growth. BP's stock price will begin to rise soon so the time to invest in shares is sooner opposed to later before the negative stigma has worn off from the cataclysmic oil spill in the Gulf of Mexico. BP is clearly undervalued, as its stock price does not reflect its true worth right now. The figures on its balance sheet and earnings reports are not stellar but there are a few key factors that indicate that this is a healthy long-term investment in the least.
Right now BP's stock price is hovering around $38. The 52-week range has been from $32 to almost $48, while the 50-day and 200-day moving averages have been $41 and $43 respectively. This indicates that the stock price is possibly at its lowest. The market cap is around $119 billion while the enterprise value is $149 billion, this suggests that there is more room for BP to grow and improve without any changes to its current operations. The price-to-earnings ratio is favorable while hovering around five or six; this is below the industry average and well below some of its major competitors in the industry. The sales numbers are increasing each quarter and the price-to-sales ratio is .31, which is very favorable and almost a third of its competitors in the industry. BP has also gone back to giving a healthy dividend yield of 4% to 5%, these are some of the highest available from any organization. Investors will benefit by investing now before the goodwill has been restored to BP's name, with time this stock price will eventually rise as the calamity of the Gulf spill fades to a distant memory.
The business model as of late, and rightly so, is to simply keep a low profile. Keeping out of headlines and being conservative in its approach is the best plan for BP right now. This makes BP quite easy to overlook for investors. Getting back to the status quo is the main agenda, along with satisfying current shareholders. The margin figures are not necessarily satisfying but that is mainly because BP is still reeling from selling assets, cleaning up the spill and months of litigation and bad publicity. The entire situation will serve as motivation for BP to be more judicious and conservative in its efforts from here on. This is reassuring to investors because it is hard to imagine a catastrophe of this nature or proportion happening again. The best time to invest is usually when a good corporation is recovering from its worse days. BP is still the largest producer of oil and gas in America. There are a few ventures on the forefront that provide promising outlook for interested investors and current shareholders.
Aside from investing in this oil and gas tycoon at a bargain, shareholder and investors can feel assured that BP does have a plan moving forward. BP recently developed a 500 ton spill containment system to avoid spills like the one in 2011. Within 10 days' time, this new system can be installed in a deep-water spill in order to redirect the leaked oil and gas into pipelines that go to the surface. Having a plan in case there is another spill will ensure that BP can at least stop the bleeding effectively in the face of another crisis. Much of the bad publicity BP endured was due to the fact there was no clear explanation or regulation for some time after the initial incident. Once BP is done paying for the damages, margins will take a turn around and help increase the stock price on the market. BP recently agreed to pay $7.8 billion earlier this year for economic, property and injury costs related to the spill. Chevron (NYSE:CVX) is actually about to release a dual-gradient drilling system that will eventually change the way the industry and all competitors operate, making drilling in open waters less risky and more environmentally friendly as well. BP will benefit with the advent of this new technology as its value increases in the market once it decides to adopt the new technology.
BP will actually be working with Chevron in a joint venture to acquire Angola LNG in order to produce and sell LNG worldwide and specifically in emerging markets in Asia. Teaming up with Chevron will help increase BP's goodwill, value in the markets and its annual earnings as well. Liquid natural gas is going to be the fastest growing energy market in the near future, a joint venture between the top tier oil and gas producers will benefit shareholders immensely as the demand currently outweighs the supply and operation scale.
BP is committed to its shareholders and upholding its long reputation for paying out high dividends. Tycoon T. Boone Pickens recently increased his investment in BP by 12 percent. BP has a lower price-to-earnings ratio and a higher dividend yield than competitors like Royal Dutch Shell (NYSE: RDS.A), Exxon Mobile (NYSE: XOM) and ConocoPhillips (NYSE: COP). BP's high beta of close to two and substandard margins are just an after effect of the spill and are currently hampering the stock price. This creates a limited window of opportunity for investors to take advantage of the undervalued BP at a discount price. Once BP is done paying fees and is able to repair its public image, stock prices will begin to rise and eventually settle above $50 possibly by 2013. Once the LNG ventures begin to become more prevalent in the market, BP's stock price could reach all-time highs of around $70 per share within the next five years. BP is an attractive investment now because it is trading at 20% to 60% below its direct competitors' stock price with comparable market cap size, yet it still has higher dividend yield and lower price-to-earnings with increasing sales numbers.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.