Is Chevron (CVX) Price Justified After Strong Multi‑Year Share Gains?

• If you are wondering whether Chevron's current share price still offers value, this article walks through the numbers so you can judge for yourself.
• Chevron's stock recently closed at US$163.85, with returns of 7.6% over 7 days, 9.2% over 30 days, 5.1% year to date, 14.6% over 1 year and 5.6% over 3 years, while the 5 year return sits at 117.1%.
• Recent price moves sit against a backdrop of ongoing investor focus on large integrated energy companies and their capital allocation, dividend policies and exposure to commodity price cycles. These themes continue to influence how investors frame risk and reward for Chevron and its peers.
• On our simple 6 point valuation framework, Chevron scores 2 out of 6, as shown by its valuation score. Next we will walk through the usual valuation approaches before finishing with a way of thinking about value that goes a step further.

Chevron scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Chevron Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a business could be worth by projecting its future cash flows and then discounting those back into today’s dollars. For Chevron, the model used here is a 2 Stage Free Cash Flow to Equity approach. It starts from current free cash flow and then applies different growth assumptions over time.

Chevron’s latest twelve month free cash flow is reported at $16.26b. Analysts provide explicit free cash flow estimates out to 2030, with projected free cash flow of $27.99b by that point. Beyond the first few years, Simply Wall St extrapolates the path of free cash flow using its own assumptions, so the further out you go, the more you should treat the numbers as rough guidance rather than precise forecasts.

When all those projected cash flows are discounted back, the DCF model suggests an intrinsic value of about $325.25 per share for Chevron. Compared with the recent share price of $163.85, this output implies the stock is 49.6% undervalued according to this model.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Chevron is undervalued by 49.6%. Track this in your watchlist or portfolio, or discover 878 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Chevron.

Approach 2: Chevron Price vs Earnings

For profitable companies like Chevron, the P/E ratio is a common way to think about what you are paying for each dollar of earnings. Investors usually accept a higher P/E when they expect stronger earnings growth or see lower risk, and look for a lower P/E when growth expectations are weaker or the risks feel higher.

Chevron currently trades on a P/E of 25.84x. That sits above the Oil and Gas industry average of 13.18x and also above the peer group average of 22.73x, so at face value the shares are priced at a higher earnings multiple than many comparable names.

Simply Wall St’s Fair Ratio for Chevron is 25.06x. This is a proprietary estimate of what Chevron’s P/E might be given factors such as its earnings growth profile, profit margins, industry, market cap and risk characteristics. Because it blends these company specific inputs, the Fair Ratio can give you a more tailored anchor than a simple comparison with peers or the broad industry.

Comparing the current P/E of 25.84x with the Fair Ratio of 25.06x suggests Chevron is slightly above that fair level, so on this metric the stock screens as overvalued.

Result: OVERVALUED

P/E ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1457 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Chevron Narrative

Earlier we mentioned that there is an even better way to understand valuation. Narratives on Simply Wall St’s Community page let you turn your view on Chevron into a clear story that connects your assumptions about future revenue, earnings and margins to a forecast and then to a fair value. This view updates automatically when new news or earnings arrive, and helps you decide what to do by comparing that fair value with the current price. This is why one Chevron Narrative on the platform might lean on the higher fair value of about US$197.00, while another anchors closer to the lower end around US$124.00, each reflecting a different, but clearly laid out, view of the same company.

Do you think there's more to the story for Chevron? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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