[1] Market Valuation: At P/EBIT of 30.8, COP is trading at a more expensive price compared to 17.5 for FSLR
Market ValuationConocoPhillipsFirst Solarvs First SolarAs of 10/21/2021 Price To Sales Ratio (P/S)3.33.7CheaperPrice To OpInc Ratio (P/EBIT)30.817.5More ExpensivePrice To Earnings Ratio (PE)5519.5More Expensive
[2] Growth & Profits: Considering the valuation, the market appears to be rewarding COP's higher growth and demonstrated profit generation ability - COP has demonstrated better revenue growth: -11.3% annually in last 3 FY, 15.3% LTM, 154.3% last Q (yoy), and -3.3% last Q (qoq) - In comparison, FSLR has grown at 0.4%, -4.9%, -2.1%, and -21.7% respectively, during the same periods - Similarly, COP has shown greater profit generation promise: COP, 19.1% margin, 18.8% margin expansion - The corresponding values for FSLR stand at 13.8%, 14.8%
Growth & ProfitConocoPhillipsFirst Solarvs First Solar As of 10/21/2021 Revenue GrowthLast Q Growth (QoQ)-3.3%-22%Growing FasterLast Q Growth (YoY)154%-2.1%Growing FasterLTM Growth15%-4.9%Growing FasterLast 3 Fiscal Year CAGR-16%-2.7%Growing Slower ProfitabilityLTM OpInc Margin11%21%Less ProfitableLast 3 Fiscal Year OpInc Margin Change-37%9.9%Greater DeclineLTM FCF Margin28%--
[3] Financial Risk: Then, is the market ignoring risk to COP? Likely as the company appears to be at higher risk vs FSLR - FSLR has a better debt position, with debt as % of equity of 2.6% vs 19.5% for COP - FSLR has more cash cushion, with cash as % of assets of 24.6% vs 7.7% for COP
Financial RiskConocoPhillipsFirst Solarvs First Solar As of 10/21/2021Debt as % of Equity20%2.6%Higher Debt LoadCash as % of Assets7.7%25%Worse Cash Position
[4] Market Returns: What about market returns of COP vs FSLR? - COP has higher average annualized return of 25.3% vs 12.8% for FSLR based on key market periods - These key market periods include, year-to-date, pre-covid to now, and 1, 2, and 3 years prior to covid
MetricsCOPFSLR Recent Returns YTD90.1%4.4%LTM133.3%22.5%Pre-Covid To Now57.0%125.5% Last 3 Years Returns4.7%121.0%Sharpe Ratio0.110.71Max Drawdown-68.5%-33.4%
Notes:
[1] Q = quarter, LTM = last twelve months, FY = fiscal years, yoy = year-on-year, qoq = quarter-on-quarter
[2] Revenue growth decision is made by giving more weightage to long-term revenue growth (3-year average) and lesser weightage to quarterly growths
[3] Margin mentioned is average of last Q, LTM, and last 3 FY; margin increase is average of increase in last Q vs LTM and increase in last Q vs 3-FY average