Growing Energy Demand: Global energy demand is expected to increase 30% from 2010 to 2040, due to expanding prosperity and a rise in the global population to nearly 9 billion people; Chevron Corporation (NYSE:CVX) is presented the opportunity to meet growing demand and fuel revenue growth.
Threats:
Faltering Energy Prices: Weakness in energy prices could squeeze the company’s margins and threaten business.
Competitors:
Major publicly traded competitors of Chevron include Exxon Mobil Corporation (NYSE:XOM), BP plc (ADR) (NYSE:BP), TOTAL S.A. (ADR) (NYSE:TOT), and Eni SpA (ADR) (NYSE:E).
Exxon Mobil is valued at $406.67 billion, pays out a dividend yielding 2.76%, and carries a price to earnings ratio of 9.33. Exxon is the largest energy company in the world, but is projected to experience flat line growth up until the year 2017. Fundamentally, Exxon Mobil Corporation (NYSE:XOM)’s business model is proven and solid, with a TTM profit margin of 9.62%.
BP plc (ADR) (NYSE:BP) is valued at $137.99 billion, pays out a dividend yielding 4.84%, and carries a price to earnings ratio of 6.21. Much like Exxon, this energy giant is facing several upcoming years of stagnant revenue growth. Over the past five years, BP’s TTM profit margin has faltered as a result of the Deepwater Disaster and the resulting expenditures, and currently sits at the 5.65% level.
TOTAL S.A. (ADR) (NYSE:TOT) is valued at $114.25 billion, pays out a dividend yielding 6.01%, and carries a price to earnings ratio of 10.36. Years of stagnant revenue and earnings growth also faces this French based company. By 2017 the book value of the company is projected to equal the current price of a share, representing substantial growth from current levels. Fundamentally, the company’s business model has been weakening since 2010, and currently possesses a TTM profit margin of 4.77%.
Eni SpA (ADR) (NYSE:E) is valued at $63.76 billion, pays out a dividend yielding 6.14%, and carries a price to earnings ratio of 29.01. This Italian company possesses operations across nearly all aspects of the energy industry, and is projected to grow revenue in the low single digits until 2015. Presently, the stock possesses a price to book ratio of only 1.07. Currently, Eni possesses a TTM profit margin of 6.09%, which has been declining over the past half decade.
The Foolish Bottom Line
Financially, Chevron Corporation (NYSE:CVX) could not be stronger. The company possesses a historic track record of consistent revenue growth, a growing dividend, and a net cash position. Looking forward, the company is likely to draw growth from the major capital projects it has planned and should benefit from meeting growing energy demand. All in all, Chevron earns 3 out of 5 stars, and is a safe and stable long-term investment that will hand investors returns that match the overall market.
Ryan Guenette has no position in any stocks mentioned. The Motley Fool recommends Chevron and Total SA. (ADR). Ryan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article Human Energy, Consistent Returns originally appeared on Fool.com and is written by Ryan Guenette.
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