Occidental Petroleum Corporation (OXY)

Conclusion

Occidental Petroleum is a Houston-based oil and gas company that explores for and produces oil, natural gas liquids and natural gas, and runs a midstream and marketing business that gathers, processes, transports and stores these products. On 9 November 2026 the shares closed at 55.76 USD, giving a market capitalisation of 55.7 billion USD and an enterprise value of 66.2 billion USD.

The verdict is undervalued. The P/E of 7.7x sits well below its ten-year median of 15.5x, and EV/EBITDA of 4.7x is below its median of 5.9x. The discounted cash flow gives 97.00 USD per share at a discount rate of 8.87%, and the fair value from historical multiples is 76.34 USD. The fair value band runs from 69.33 to 104.00 USD with a midpoint of 86.67 USD, a margin of safety of 55.4% at today's price. The reverse DCF implies growth of -3.2% a year, while revenue grew 4.7% a year over five years and free cash flow per share grew 36.8% a year over the same period.

The strongest supports are the eight earnings beats in eight quarters, free cash flow conversion of 73.2% on a trailing basis, and net debt to EBITDA of 0.75x. The weakest numbers are earnings per share, which fell at a compound 43.6% a year over three years, the next-year earnings estimate of -27.0%, and ROIC of 8.15% against a WACC of 7.84%. A further drag is the Altman Z-score of 1.98, which falls in the grey zone.

Financial health

Financial health is green, held up by net debt to EBITDA of 0.75x, a current ratio of 1.41 and a quick ratio of 1.04, with debt to equity at 0.35. Interest coverage of 7.5x is only neutral. The Altman Z-score is 1.98, in the grey zone; the model was designed for manufacturers, so it is a loose guide for an oil producer. Insolvency risk: low, about 0.4% by the estimate of the Ohlson model over one to two years, based on figures to 31 December 2025. Net debt to EBITDA and the current ratio are the strongest points, while the Altman reading and interest coverage argue for watching the balance sheet if oil prices weaken.

Earnings quality

Earnings quality is green. Free cash flow conversion is 73.2% on a trailing basis and 134.8% over five years, and the accrual ratio is -9.5%, which suggests reported earnings are backed by cash. Free cash flow after stock-based compensation is 5.31 billion USD on a trailing basis. The company does not report its stock-based compensation, so that check is not available. The share count has grown at 1.7% a year over five years, so there have been no net buybacks. The Piotroski score is 4 out of 9, and the Beneish M-score of -2.16 is read as unlikely to indicate manipulation. The company beat earnings estimates in all eight quarters, with an average surprise of 35.5%. Analysts have raised current-year estimates by 26.3% over 90 days, with no downgrades in the last 30 days.

Profitability

Profitability is green. The gross margin of 43.4%, operating margin of 23.0% and net margin of 28.8% are all well above their ten-year medians of 30.4%, 17.6% and 10.7%. Margins have been stable, with a stability reading of 1.10. The key test is returns: ROIC is 8.15% against a WACC of 7.84%, a difference of 0.31%, which is only neutral and means the company barely earns its cost of capital. Return on equity is 17.4%, but the DuPont split shows leverage at work: a net margin of 11.0%, an asset turnover of 0.25 and an equity multiplier of 2.41, as of 31 December 2025. Much of the equity return therefore comes from balance sheet gearing rather than from the operations alone.

Growth

Growth is red. Revenue fell at a compound 15.9% a year over three years, but grew 4.7% a year over five years and 5.6% a year over ten. Revenue rose in five of the ten comparable years. Earnings per share fell at a compound 43.6% a year over three years. Free cash flow per share fell 30.9% a year over three years but rose 36.8% a year over five years, so the recent trend is weak after a strong recovery. The next-year earnings estimate of -27.0% points to further decline in the near term, and this is the main reason the growth picture is red.

Valuation

Valuation is green. The P/E of 7.7x is 50.5% below its ten-year median of 15.5x, EV/EBITDA of 4.7x is 20.4% below its median of 5.9x, price to free cash flow of 10.5x is 30.8% below its median of 15.2x, and price to book of 1.34x is 27.0% below its median of 1.83x. Price to sales of 2.2x is 8.2% above its median of 2.0x. The discounted cash flow gives 97.00 USD per share at a discount rate of 8.87%, with the terminal value making up 56.0% of that figure. The fair value band runs from 69.33 to 104.00 USD, a midpoint of 86.67 USD, and a margin of safety of 55.4%. This is an order of magnitude built on fixed assumptions, including a 5% equity risk premium and capped growth, not a price target. The reverse DCF implied growth of -3.2% is well below the five-year revenue growth of 4.7%. The dividend yield is 2.97%, with a payout of 31.2% of free cash flow.

Risks

The main risk is a return to falling earnings. Earnings per share have fallen 43.6% a year over three years and analysts expect a further 27.0% decline next year, which would weigh on the multiples that currently look cheap. A weaker Altman Z-score of 1.98 and interest coverage of 7.5x leave less room if oil and gas prices fall. ROIC of 8.15% barely exceeds the WACC of 7.84%, so any drop in returns would push the business below its cost of capital. Share count growth of 1.7% a year dilutes shareholders rather than returning cash to them.

Several values are not available: stock-based compensation, a debt maturity schedule and revenue by segment. Without the maturity schedule, the refinancing risk cannot be measured directly. The valuation depends on fixed assumptions and on a terminal value that accounts for over half of the DCF, so the fair value band should be read as a rough range.