BP plc BP stock is currently relatively cheap as the company is trading at a trailing 12-month EV/EBITDA multiple of 2.97x, which is lower than the broader industry average of 5.88x. ExxonMobil Holdings Corporation XOM and Chevron Corporation CVX, two other integrated energy majors, are valued higher at 9.40x and 7.96x, respectively.
Should investors bet on the undervalued British energy giant right away? Let’s first analyze BP’s business fundamentals.
BP’s Upstream Business Outlook Looks Promising
The price of West Texas Intermediate (“WTI”) crude is hovering around $90 per barrel. The high price is being backed by ongoing tensions in the Middle East. The U.S. Energy Information Administration (“EIA”) in its latest short-term energy outlook projected WTI at $88.21 per barrel this year, higher than $65.40 in 2025. A highly favorable pricing environment for the commodity is likely to continue supporting BP's exploration and production activities, which derive a significant proportion of its earnings, similar to ExxonMobil and Chevron.
The British energy major’s production outlook seems bright, thanks to its major projects, expected to begin operations between 2028 and 2030, are moving forward as planned. Once operational, these projects could help BP increase production and generate more cash.
BP's Refining Operations Offer Growth Potential
BP is working to improve its refining business by making better use of its refineries, trading operations and customer networks. The British energy giant benefits from its ability to buy crude oil from different markets and sell refined products where demand is stronger. Its Cherry Point refinery in the United States can access crude oil from global suppliers and export products to different markets. This operational flexibility could allow BP to respond more effectively to shifts in crude oil supplies and fuel demand, supporting higher refining margins and stronger earnings potential.
BP also benefited from higher refining margins in the second quarter of 2026. The company processed approximately 1.5 million barrels of crude oil per day, despite planned maintenance at its refineries. Stronger refining margins and improved oil trading performance supported earnings. Efforts to reduce operating expenses and improve refinery performance could translate into healthier profit margins and more consistent cash generation from BP's downstream segment.
Is BP Stock a Must-Buy Now?
All the positive developments are yet to be reflected in the stock price. Over the past year, BP has jumped 38.4%, underperforming the industry’s growth of 46.5%. Over the same time frame, XOM has surged 52.2% and CVX gained 42.1%.
Thus, backed by all the strong business fundamentals and BP’s undervaluation, it is high time to bet on the British energy player, which currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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BP p.l.c. (BP): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).