Insiders Have Been Buying Shares of Apache

Apache’s peers include Anadarko Petroleum Corporation (NYSE:APC), Devon Energy Corp (NYSE:DVN), BP plc (NYSE:BP), and Exxon Mobil Corporation (NYSE:XOM). BP and Exxon Mobil, as we’d implied earlier, have trailing earnings multiples of about 10- a significant discount to where Apache trades- but the Street expects less improvement on the bottom line at those two companies with the result being that they have slightly larger forward P/Es. BP has also been reporting a declining business, with revenue and net income down last quarter compared to the fourth quarter of 2011. Anadarko carries trailing and forward P/E multiples of 17 and 16, respectively, reflecting that its earnings are also anticipated to show little change; that company’s sales also dipped in the fourth quarter versus a year earlier. Devon reported a similar decline in revenue to Anadarko, and its stock price has fallen 25% in the last year. It’s another company where analysts are forecasting an improvement over the next couple years, which would pull its forward earnings multiple down to about 10.

The value case for Apache depends on it hitting its earnings targets, because it is not cheap compared to the oil majors we’ve discussed in terms of trailing earnings. It’s certainly possible that the company will do so but we would hesitate to be too trustworthy of analyst expectations of a significantly stronger business. As a result we would avoid the stock at least until Apache began reporting results which were in line with the sell-side’s trajectory.

Disclosure: I own no shares of any stocks mentioned in this article.