Anadarko Petroleum Corporation (APC), ConocoPhillips (COP), BP plc (ADR) (BP): This Company Is a Buy Despite Its Legal Troubles

Competitors

Its larger peer BP plc (ADR) (NYSE:BP) is vertically integrated and operates at all levels of the value chain. In the past one year, the stock has been quite volatile. The company is steadily recovering from its liabilities related to Gulf of Mexico spill, which has resulted in a fall in EPS over the last few years.

But recently, BP plc (ADR) (NYSE:BP) has been reporting better financial results. The trailing P/E ratio of the company is 11.38, which is higher than the industry average, while the forward P/E ratio is lower. The EPS growth forecast for the next five years is much better than the growth in the last five years. Because of the expected growth forecast, a dividend yield of around 5%, and plans to buyback shares, the stock is expected to give sufficient returns to the investors in the long run.

ConocoPhillips (NYSE:COP) has separated its refining and marketing division into an independent company, Phillips 66 (NYSE:PSX). It has allowed the company to focus on its exploration and production business. Since June last year, the stock has appreciated more than 42%. It is currently trading at trailing P/E ratio of 8.60 and a forward P/E ratio of 9.66, which are slightly above the industry average.

But, its growth forecast for the next five years is relatively better than the growth in the last five years. The company has a high dividend yield of 4.51%. Therefore, because of the business restructuring, better growth forecast, and high dividend yield, this might be a good stock to buy.

Conclusion

Anadarko Petroleum Corporation (NYSE:APC)’s trailing P/E ratio is 17.21, which is slightly higher than the industry average. But its P/S is 3.05, trading at more than 25% discount to its industry average. Its forward P/E ratio is lower at 15.78. This is because the growth forecast for the next five years is 20.5%. The company also has a high profit margin and high return on equity. Despite being in a capital intensive industry, the debt/equity ratio of the company is lesser than the industry average.

The optimistic growth forecast is also driven by the recent natural gas discovery in Mozambique, huge oil discovery in Gulf of Mexico, upcoming Brasada plant, growing reserves and increasing production. The Tronox liability might lead to some fall in the stock price for some time, but it will recover in medium to long-term because of the factors mentioned above.

The article This Company Is a Buy Despite Its Legal Troubles originally appeared on Fool.com and is written by Shas Dey.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.