ConocoPhillips

Methodology

ConocoPhillips earnings swing dramatically with oil and gas prices, requiring normalized commodity price assumptions for meaningful fair value calculations. Current-year earnings at peak or trough oil prices distort intrinsic value assessments. The method works best using mid-cycle oil prices ($60-70 WTI) rather than spot prices.

Methodology

ConocoPhillips typically trades at PEG ratios below 0.5x during downcycles and above 2x during upcycles, reflecting extreme commodity cyclicality. Production growth comes from disciplined capital allocation rather than aggressive drilling. PEG misleads in energy stocks because earnings growth often reflects commodity price changes rather than business improvement.

Methodology

PEGY significantly enhances ConocoPhillips' valuation appeal given its 3-4% dividend yield plus aggressive share buybacks totaling 6-10% annual shareholder returns. The company's return-of-capital framework prioritizes cash returns over production growth. Total shareholder yield often exceeds 8%, making yield-adjusted metrics more representative of investment value.