Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Is BP plc (ADR) (BP) Destined for Greatness?

Page 1 of 2

Investors love stocks that consistently beat the Street without getting ahead of their fundamentals and risking a meltdown. The best stocks offer sustainable market-beating gains, with robust and improving financial metrics that support strong price growth. Does British Petroleum fit the bill? Let’s take a look at what its recent results tell us about its potential for future gains.

BP plc (ADR) (NYSE:BP)

What we’re looking for
The graphs you’re about to see tell BP plc (ADR) (NYSE:BP)‘s story, and we’ll be grading the quality of that story in several ways:

  • Growth: are profits, margins, and free cash flow all increasing?
  • Valuation: is share price growing in line with earnings per share?
  • Opportunities: is return on equity increasing while debt to equity declines?
  • Dividends: are dividends consistently growing in a sustainable way?

What the numbers tell you
Now, let’s take a look at BP plc (ADR) (NYSE:BP)’s key statistics:

BP Total Return Price Chart

BP Total Return Price data by YCharts

Passing Criteria 3-Year* Change Grade
Revenue growth > 30% 47.5% Pass
Improving profit margin (24%) Fail
Free cash flow growth > Net income growth (124.7%) vs. (12.1%) Fail
Improving EPS 10.5% Pass
Stock growth (+ 15%) < EPS growth (20.2%) vs. 10.5% Pass

Source: YCharts.
*Period begins at end of Q1 2010.

BP Return on Equity Chart

BP Return on Equity data by YCharts

Passing Criteria 3-Year* Change Grade
Improving return on equity (7.4%) Fail
Declining debt to equity 15.7% Fail
Dividend growth > 25% 28.6% Pass
Free cash flow payout ratio < 50% Negative FCF Fail

Source: YCharts.
*Period begins at end of Q1 2010.

How we got here and where we’re going
BP plc (ADR) (NYSE:BP) doesn’t quite come through with flying colors, as it’s only earned four out of nine possible passing grades. A big source of weakness is the company’s falling free cash flow, which has diverged markedly from its net income over the past three years, and which may not be able to support its current dividend payouts if the trend continues. Will BP plc (ADR) (NYSE:BP) be able to move past this problem, or is the oil and gas supermajor going to be tarnished for some time to come? Let’s dig a little deeper.

All of the major oil and gas companies have been at the mercy of sluggish economic growth and dwindling global demand for their products, and BP is certainly no different. Global energy  consumption grew by only 1.8% in 2012, well below the 10-year average of 2.6%. Emerging market economy demand, which has been typically driving consumption growth, is now almost exclusively dependent on China and India; together, the demand from these two countries accounted for almost 90% of the global increase last year.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!