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The Razor’s Edge

2-Year Price History

Recent Price
52-Week Price
$55.50 – $104.63
Market Capitalization
$151.9 Billion
Dividend Yield
Most Recent Dividend

About Chevron Corp.

Chevron Corporation is considered to operate in the Basic Materials sector. They specifically operate in the Major Integrated Oil/Gas business segment contained within the Energy industry.

The Company provides administrative, financial, management and technology support to U.S. and international subsidiaries that engage in integrated petroleum operations, chemicals operations, mining operations, power generation and energy services.

Ockham’s Rating

We are reiterating our Undervalued rating on Chevron Corporation (CVX) this week. Chevron Corporation was downgraded to this rating in the report dated 11/10/2008. While we are reaffirming our previous rating, it is still important to understand recent developments for Chevron Corporation, which may have an effect on the stock going forward.

For starters, the price of CVX rose from $70.49 as of 11/22/2008 to a price of $79.01 as of 11/29/2008. While this increase of 12.09% was not large enough for Ockham to downgrade the stock, it does however slightly lessen the attractiveness of CVX.

As of this report, there have been no meaningful adjustments in cash earnings expectations or guidance in the last week.

CVX Stock Evaluation

In this week’s report, we are reiterating our Undervalued rating on CVX. In the last week there has been no revisions made to earnings expectations, but our valuation has obviously been influenced by the increase in price of 12.09%. While that price increase has not caused a downgrade this week, we will continue to closely monitor the fundamentals in case a future change in rating is warranted. The complete fundamental analysis of CVX follows below.

CVX Revenue

For a long time, value investors have used the current share price relative to sales per share levels as an important valuation tool. We utilize a historical weighted average methodology that treats recent years more importantly in the calculation. When looking at CVX through this framework, we can see that our weighted average historical high and low Price to Sales per share ratios over the last 9 years are 0.86x and 0.59x respectively.

Utilizing this range we can see that CVX’s current Price to Sales per share ratio of 0.59x is significantly below its average levels historically. In fact, with a current price of $79.01, CVX is a full 19% below its average Price to Sales ratio at comparable sales levels. This is a rare occurrence and, when taken in context of the other areas of our analysis, can be a strong positive for our outlook for CVX.

CVX Cash Earnings

Looking at CVX specifically in their Cash Earnings capabilities, Ockham views CVX as significantly below its historical average multiple of cash earnings as calculated by Ockham. Similar to our analysis of sales per share, Ockham looks at the last 9 years of cash earnings levels for CVX to identify where the current high and low price levels have been historically in relation to profit per share. Again, we utilize a weighted average methodology which relies more heavily on recent years of data. This weighted average framework provides us with an average high Price to Cash Earnings ratio per share of 7.32 and a 5.02 low over the same period.

Now that CVX’s current price is $79.01 and its Price to Cash Earnings ratio is 4.40, we are very positive on its outlook from the cash earnings perspective. In fact, CVX is now trading a full 29% below its average historical Price to Cash Earnings ratio at these profit per share levels. When our clients ask us why CVX has great long term potential, the Cash Earnings levels to current stock is one of our primary reasons. But naturally, now we need for the overall market to recognize this disparity.

CVX Dividends

When determining a company’s future prospects for success, Ockham Research sees analysis of dividend payments as a key additional factor. Even though it isn’t imperative for CVX to shell out a dividend in order to receive a positive rating, it can be helpful to further our analysis.

The estimated annual dividend for CVX is $2.60 producing a current dividend yield of 3.29%. Much like our evaluation of Sales and Cash Earnings per share, we review dividend yields from CVX against the historic high and low levels over all available dividend history. Because dividends are a decision made exclusively by management, we view a healthy and rising dividend as a sign of confidence and strength. The highest dividend yield from CVX over previous years was 4.68% while the lowest dividend yield was 0.75%. It’s hard not to notice that CVX pays a current dividend yield that is 21.18% above the historical median. This peaks our interest since our analysis is looks favorably upon dividend yields that are greater than the historical median.

Peer Comparison


Chevron Corp. Industry Grouping

Company Ticker Market Cap (Ml) Latest
Price/Cash Earnings Price/Sales 5-Yr. Rev.
Growth Rate
Avg. ROE.
Current 10-Yr. Range* Current 10-Yr. Range*
Peer Company Averages (not incuding CVX) 3.67 2.79 » 10.30 0.64 0.83 » 6.27 18.60% 24.20%
*10 year range does not include current year values
PetroChina Co. Ltd. ADS PTR $152.9 Billion $83.53 4.19 2.34 » 16.45 1.07 0.86 » 13.95 31.10% 22.74%
Chevron Corp. CVX $151.9 Billion $74.74 4.40 3.22 » 15.37 0.59 0.90 » 3.88 17.34% 24.32%
BP PLC BP $142.4 Billion $45.33 3.95 3.19 » 12.31 0.56 1.10 » 4.80 9.73% 22.08%
Total SA TOT $111.2 Billion $49.74 3.85 3.33 » 9.76 0.62 0.80 » 4.94 13.16% 28.52%
Royal Dutch Shell PLC Class A RDSA $87.2 Billion $50.00 3.35 2.61 » 6.26 0.37 0.61 » 1.75 n/a 24.25%
ENI Spa E $86.5 Billion $43.17 3.02 2.46 » 6.71 0.56 0.80 » 5.91 20.41% 23.42%
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Key Fundamentals

CVX – Chevron Corporation Fundamentals
Price (12/3/2008) $74.74
Volume (12/3/2008) 21.8 Million
10 Day Average Volume 22.7 Million
13 Week Price Range $55.50 – $89.75
52 Week Price Range $55.50 – $104.63
LTM Revenue $279.2 Billion
Shares Outstanding (12/2007) 2.0 Billion
Market Capitalization $151.9 Billion
Shares Held By Institutions 1.4 Billion
Insitutional Holders 1,842
% Shares Held By Institutions 66%
Earnings Per Share (EPS) $8.77
P/E Ratio 6.50
Book Value Per Share $42.80
Gross Margin 25.70%
Quarterly Dividend 2.60
Dividend Yield 3.50%
Beta 0.75
Fiscal Year Ends December