July 2, 2015

VALUATION WATCH: Overvalued stocks now make up 61.71% of our stocks assigned a valuation and 25.81% of those equities are calculated to be overvalued by 20% or more.  Fifteen sectors are calculated to be overvalued--eight by double digits.

Editor's Note: Markets are closed tomorrow for the July 4th holiday in the US. There will be no weekly newslette. We will resume normal publciation next Friday.

--We're Sorry... Really Sorry

BP Settles With US Government and Gulf States

BP p.l.c. is the holding company of one of the world's largest petroleum and petrochemicals groups. Their main activities are exploration and production of crude oil and natural gas; refining, marketing, supply and transportation; and manufacturing and marketing of petrochemicals. They have a growing activity in gas and power and in solar power generation. BP has well-established operations in Europe, North and South America, Australasia and Africa.

The media are reporting today that BP has reached a settlement related to damages associated with the massive 2010 Gulf of Mexico oil spill. Details have not yet been released, but according to Bloomberg, press conferences are scheduled for this morning by the Attorney Generals of states effected by the spill--Louisiana, Mississippi, Alabama, and Florida.

The 2010 spill was a disaster for the Gulf and BP's reputation, exposing lax safety practices and a seeming lack of concern on the part of the firm and CEO Tony Hayward. Hayward's legendary "Sorry" speech, which was a PR disaster, led to his widespread ridicule and eventual resignation.

"Sorry" BP CEO Hayward, Skewered by TV's "Southpark"

Since then, the company has spent almost $30 billion on clean up and associated costs--out of a war chest of @$44 billion. But, the company has been fighting claims along the way and trying to avoid big payouts to states and cities under the US federal Oil Pollution Act.

BP was an interesting case from a quant research perspective, because as shareholders dumped the stock, the price dived yet earnings as calculated by analysts remained the same. So, it actually looked more attractive to computer-based stock forecasting and valuation models.

Angry environmentally-conscious investors berated firms who ranked the BP a BUY despite the milions of barrels of oil pouring into the Gulf. This was yet another example of the fact that computers can only measure financial data, and until qualitative analysts adjusted earnings data to reflect the liabilities associated with the spill, a true picture of the company's health was impossible to obtain. The stock has never returned to where it was before the spill, and is currently up @23% from the low it hit in June, 2010--although it had been up from the low almost 70% in July, 2014

Below is today's more extensive data on BP:

VALUENGINE RECOMMENDATION: ValuEngine continues its HOLD recommendation on BP PLC for 2015-06-30. Based on the information we have gathered and our resulting research, we feel that BP PLC has the probability to ROUGHLY MATCH average market performance for the next year. The company exhibits ATTRACTIVE Company Size but UNATTRACTIVE Earnings Growth Rate.

ValuEngine Forecast
	Target Price*	Expected Return
1-Month	40.08	0.31%
3-Month	40.87	2.28%
6-Month	41.41	3.63%
1-Year	41.43	3.68%
2-Year	39.15	-2.03%
3-Year	45.53	13.93%

Valuation & Rankings
Valuation	1.64% overvalued	Valuation Rank(?)	59
1-M Forecast Return	0.31%	1-M Forecast Return Rank	74
12-M Return	-20.79%	Momentum Rank(?)	28
Sharpe Ratio	-0.02	Sharpe Ratio Rank(?)	42
5-Y Avg Annual Return	-0.71%	5-Y Avg Annual Rtn Rank	41
Volatility	32.50%	Volatility Rank(?)	54
Expected EPS Growth	-27.64%	EPS Growth Rank(?)	11
Market Cap (billions)	121.44	Size Rank	100
Trailing P/E Ratio	12.18	Trailing P/E Rank(?)	87
Forward P/E Ratio	16.84	Forward P/E Ratio Rank	49
PEG Ratio	n/a	PEG Ratio Rank	n/a
Price/Sales	0.38	Price/Sales Rank(?)	88
Market/Book	1.54	Market/Book Rank(?)	63
Beta	1.97	Beta Rank	13
Alpha	-0.38	Alpha Rank	21

As a bonus to our Newsletter readers,
we are offering a FREE DOWNLOAD of one of our Stock Reports

Read our Complete Detailed Valuation Report on BP HERE.

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