Being an investment analyst and portfolio manager, I am constantly on the lookout for companies that offer good investment opportunities. In this article I take a look at Exxon Mobil (XOM) and ConocoPhillips (COP) - two energy companies that may offer investors upside potential that outweighs the risks.
We'll use the management effectiveness ratios, book value-share, price-sales and price-book value to evaluate Exxon and Conoco.
Additionally, macro-economic indicators are provided at the end of the article. As part of investment analysis, analysts should consider both the company fundamentals and the macro-economic landscape. The macro-economic picture in the U.S. is deteriorating. In Europe, the economy is currently contracting.
Buy - Be long
Neutral - No position
Sell - Be short
The ratings, research and analysis in this article should be considered as starting point for further research.
Exxon - Buy
The financial position of Exxon is improving; book value-share and revenue-share are increasing. The share price is declining, and the enterprise is undervalued on a relative and absolute basis. Additionally, the management effectiveness ratios suggest management is effective, relative to the industry.
Although, the macro-economic risks from potential fiscal consolidation, in the US and European Union, could cause valuations to decline further.
Some investors may want to protect long positions by buying put or selling call options.
Company v. Industry
- Return on Assets (TTM): 12.36 v. 5.67
- Return on Investment (TTM): 16.5 v. 6.88
- Return on Equity (TTM): 25.84 v. 9.45
Book value-share is increasing; the increase in book value-share is bullish.
The share price is increasing; however, recently the share price has declined.
Price-sales is declining as the share price is rising; the enterprise is getting cheaper. Additionally, revenue-share is currently increasing.
Price-book value is off of its recent high; however, it is still above the 2011 low.
ConocoPhillips - Buy
- Return on Assets (TTM): 7.70 v. 0.43
- Return on Investment (TTM): 9.71 v. 0.78
- Return on Equity (TTM): 18.09 v. 1.42
The financial position of Conoco Phillips is improving as revenue-share increases. The share price is declining, and the enterprise is undervalued on a relative and absolute basis. Additionally, the management effectiveness ratios suggest management is effective, relative to the industry.
Although, the macro-economic risks from potential fiscal consolidation, in the US and European Union, could cause valuations to decline further. Some investors may want to protect long positions by buying put or selling call options.
ConocoPhillips revenue-share is increasing; the increase is revenue-share is bullish.
ConocoPhillips share price is declining; although, the share price remains above the 2011 low.
ConocoPhillips has gotten cheaper over the last year on a price-sales basis.
Price-operating cash flow is declining as price declines, and operating cash flow is increasing.
ISM Non-manufacturing PMI is declining; the decline in non-manufacturing PMI is considered bearish. ISM non-manufacturing PMI should stabilize in the coming months.
The pace of job growth has slowed in recent months and may stabilize at low levels.
CB consumer confidence is increasing and may decline in the coming months. The Expectation Index and the Present Situation Index both declined, according to the latest report.
European Union services PMI is declining and should increase in the coming months.
European Union manufacturing PMI is declining and should increase in the coming months. A silver lining from the current release of the report is that the pace of decline in Italian manufacturing is slowing. Additionally, the depth of the contraction in manufacturing has yet to reach the depth of the contraction from the financial crisis in 2009.
Disclaimer: This article is not meant to establish or continue an investment advisory relationship. Before investing, readers should consult their financial advisor. Christopher Grosvenor does not know your financial situation and ability to bare risk and thus his opinions may not be suitable for all investors.