BP p.l.c. (NYSE:BP) closed at $46.25 on October 9. The stock has returned -0.4% during the last six months, compared to a 33.9% return for Insider Monkey Billionaire Index and 18.2% for the State Street SPDR S&P 500 ETF Trust. Exxon Mobil Corporation (NYSE:XOM) closed at $168.94 and has returned 10.8% over the same six months. Neither of them cleared either benchmark over that period.
Both are leveraged to the same oil price, and almost nothing else about them is comparable. One has spent a decade buying the best acreage in America. The other spent it selling assets to fund a dividend and a strategy it has since walked away from.
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The Same Barrel Produces Very Different Profit:
Gross margins are nearly identical, which is what you would expect from two companies pulling the same commodity out of the ground. The paths diverge immediately after.
At the net line, the gap becomes severe. Net margin is 9.07% at Exxon Mobil against 2.55% at BP, so Exxon keeps more than three dollars of final profit for every one BP keeps on a comparable barrel. The explanation is refining and chemicals integration, scale in the Permian, and a cost base BP has spent a decade failing to match.
The balance sheets are not in the same category either. Debt-to-equity is 15.92% at Exxon Mobil against 95.12% at BP, which is the difference between a company that can buy assets in a downturn and one that must sell them. That gap is what sets the order of the crude oil stocks we picked for dividends, where the producer we placed first has returned 45% since.
Both grew revenue sharply in the most recent quarter, and the oil price did almost all of that work. Two companies pulling the same barrel and keeping different profits is the clearest read on management there is.
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Neither Is Cheap Once the Oil Price Comes Out:
Both sets of earnings were produced with Brent crude above a hundred dollars a barrel, after an even higher peak earlier in the year. The Iran conflict put it there by threatening shipping lanes that carry about a fifth of the world’s oil. The Energy Information Administration expects Brent to average roughly $84 a barrel in 2027, well below where it sits today. On that path, the earnings behind both forward multiples do not arrive, and the multiples rise rather than fall.
BP trades at 8.67 times forward earnings on analyst consensus estimates and Exxon Mobil at 14.74. That BP figure is not a discount, it is a forecast that peak cycle earnings grow again from here. A cyclical company is always cheapest at the top of its cycle, and this could be the top of one. Neither company set the price that produced these earnings, which is exactly what separates a commodity dividend from the kind paid by the dividend blue chips hedge funds have been adding. Their heaviest position is up 23% since.
The Valuation Case:
The verdict is that Exxon Mobil looks fairly valued for its quality, and BP looks cheaper for a reason, which is not the same as cheap. Price-to-book is the measure that survives a lower oil price, and it separates them honestly. If crude holds above a hundred dollars, BP is the higher beta instrument, and if the Energy Information Administration is right, the balance sheet decides who is still buying assets in two years. Businesses cheap for reasons within their own control are the easier proposition, which is the whole appeal of the profitable undervalued companies we picked. The one we ranked first has returned 16% since.
Conclusion:
Exxon Mobil is the stronger business by a wide margin. It keeps more than three dollars of final profit for every one BP keeps on a comparable barrel, and it carries a fraction of the leverage. However, neither looks cheap once the oil price is taken out. Both grew earnings enormously on crude that neither company sets, and the Energy Information Administration expects Brent well below today’s level next year. A cyclical is always cheapest at the top of its cycle, and BP’s forward multiple assumes peak earnings grow again rather than revert. Crude will not stay where it is, and price to book is the comparison that survives when it falls.
Market Sentiment:
BP p.l.c. (NYSE:BP) was held by 46 hedge funds with a combined stake value of about $4.96 billion at the end of Q2 2026 in the Insider Monkey database. This is down from 49 hedge fund holders with a cumulative investment value of around $5.78 billion in the previous quarter.
Exxon Mobil Corporation was held by 96 hedge funds with a combined stake value of about $11.33 billion at the end of Q2 2026 in the Insider Monkey database. This is up from 94 hedge fund holders with a cumulative investment value of around $11.68 billion in the previous quarter.
While we acknowledge the risk and potential of BP and XOM as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than BP and XOM and that has 10,000% upside potential, check out our report about this cheapest AI stock.
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This article is originally published at Insider Monkey.
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