BP: Why the Stock Is a Risky Pick
BP (NYSE:BP) is one of the world’s largest integrated oil producers. While it has headquarters in the U.K., it is a company familiar to American consumers and investors, as it operates here, and more than $250 million worth of BP stock trades in the U.S., on average, every day.
While BP is still known as the company that caused the Gulf oil spill, the fact remains that BP is a relatively inexpensive stock that returns a lot of capital to shareholders. Thus, for investors looking for an energy stock that pays a large dividend and buys back a lot of stock, BP might be the way to go.
Looking at the earnings report, we find that earnings came down in Q1 of 2014 versus Q1 of 2013, from $3.2 billion to $4.2 billion. The company’s lower earnings were the result of higher exploration costs. Despite the decline year over year, there was an increase quarter over quarter, which indicates that perhaps the higher exploration costs are behind the company. Considering that the company is valued at $150 billion and that $3.2 billion per quarter comes to $12.8 billion if we annualize it, the stock trades with a very modest price-to-earnings ratio of 11.8. This is slightly more than half of the S&P 500.