Is ConocoPhillips Still a Good Investment?

With shares of ConocoPhillips (NYSE:COP) trading at around $62.32, is COP an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock's Movement

ConocoPhillips has been working hard to shed low-margin operations. It's using the freed up capital to invest in higher-margin operations. This is a simple yet effective approach, but will it be enough to send the stock price higher?

On the bullish side, the Energy Information Administration (AMEX:EIA) expects an increase in crude oil prices, which would be a positive for ConocoPhillips. Many analysts are also calling for global monetary policy to assist global growth. Other potential positives are if Europe bottoms and China rebounds. However, there can be a lot of hope found in the previous sentence. On a company-specific basis, ConocoPhillips is looking to increase production, and it expects margin improvement between 3 and 5 percent over the next five years. It should also be noted that advanced technologies have the potential to lead to increased oil extraction.

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On the bearish side, the era of super-low interest rates might be coming to an end. If this trend continues, then the stock market isn't likely to perform as well as it has been over the past several years. This would be a negative for ConocoPhillips, which declined approximately 60 percent during the financial crisis of 2008/2009. This is in comparison to an approximately 40 percent decline for Chevron Corporation (NYSE:CVX) and an approximately 30 percent decline for Exxon Mobil Corporation (NYSE:XOM). This isn’t to say that the market will suffer such a severe drop, but these numbers should be noted for those who are focused on capital preservation.

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While rising interest rates will negatively impact the stock market, the biggest concern for ConocoPhillips is weak global demand. Who's to say Europe is bottoming? Where is the proof in this statement? In regards to China, growth is slowing. It's only a slight decline, but it's still not the right direction.

As far as the dollar goes, it's not as important as in the past thanks to energy independence. This is now a supply and demand story more than anything else.

In regards to company culture and leadership, they're both impressive at ConocoPhillips. According to Glassdoor.com, employees have rated their employer a 3.5 of 5, and 93 percent of employees approve of CEO Ryan M. Lance.

Let's take a look at some important numbers prior to forming an opinion on this stock.
T = Technicals Have Been Strong

ConocoPhillips has performed well over the past three years. However, the pace has slowed.

	1 Month	Year-To-Date	1 Year	3 Year
COP	0.62%	9.82%	20.78%	85.90%
XOM	0.46%	7.07%	16.10%	64.23%
CVX	-0.78%	14.33%	24.65%	89.58%

E = Equity to Debt Ratio Is Normal

The debt-to-equity ratio for ConocoPhillips is close to the industry average of 0.50.

	Debt-To-Equity	Cash	Long-Term Debt
COP	0.44	5.45B	21.67B
XOM	0.08	6.21B	13.41B
CVX	0.10	19.05B	14.14B

E = Earnings Have Been Steady

The numbers below can be confusing due to the spinoff. In this case, it’s better to look at the quarterly numbers on a sequential basis.

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Fiscal Year	2008	2009	2010	2011	2012
Revenue ($) in millions	246,182	152,840	198,655	251,226	62,004
Diluted EPS ($)	-11.16	3.24	7.62	8.96	6.72

Looking at the last four quarters on a sequential basis, revenue and earnings have been a bit inconsistent, but the numbers have still been solid.

Quarter	Mar. 31, 2012	Jun. 30, 2012	Sep. 30, 2012	Dec. 31, 2012	Mar. 31, 2013
Revenue ($) in millions	58,354	15,166	15,089	16,366	14,651
Diluted EPS ($)	2.27	1.80	1.46	1.16	1.73

Now let's take a look at the next page for the Conclusion. Is this stock an OUTPERFORM, a WAIT AND SEE, or a STAY AWAY?

Conclusion

ConocoPhillips is trading at 10.5 times earnings, costs are being cut, and the stock has been a long-term winner. On the other hand, if you cut out all the noise and simply look at supply and demand, this doesn't seem to be the best time to invest in ConocoPhillips. Despite Exxon Mobil yielding 2.80 percent and ConocoPhillips yielding 4.20 percent, Exxon Mobil still looks to be the better option.