With shares of oil supermajor BP plc (NYSE:BP) trading around $40.30, is BP a Buy, a Wait and See, or a Stay Away? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
E = Equity to Debt Ratio is Close to Zero
BP has a debt-to-equity ratio of 0.42, which is surprisingly strong considering the capital-intensive industry in which it operates, and the billions of dollars it has had to raise for legal fees and settlements related to the Deepwater Horizon disaster. But BP’s ratio clocks in way above other supermajors. Chevron Corp. (NYSE:CVX) has a debt-to-equity ratio of 0.09, while Exxon Mobil Corp. (NYSE:XOM) has a debt-to-equity ratio of just 0.07.
However, BP’s debt situation looks a little different with total debt of $49.08 billion and total cash of $16.36 billion for the most recent quarter. The costs associated with environmental and legal cleanup from the Deepwater Horizon disaster are readily apparent in these numbers. While the company’s typical debt load may not be this high or its cash reserves so low because of the incident, its war chest is still up to par.
Exxon Mobil has only $13.06 billion in cash, with $12.42 billion in debt. Chevron takes the crown with $21.58 billion in cash and $12.34 in debt.
T = Technicals on the Stock Chart are Strong
As of November 14, the stock price is 1.91 percent below its 20-day simple moving average, or SMA; 2.14 percent below its 50-day SMA; and 0.86 percent below its 200-day SMA.
Since 2012, the stock has been in a downward trend, losing 8.68 percent of its value this year to date, and 7.76 percent year over year.
For comparison, Exxon Mobil is up 0.38 percent YTD and Chevron is down 8.02 percent YTD.
BP is trading in a 52-week range between $36.25 and $48.34 per share.