BP (LSE:BP.) Could Be 17% Undervalued Following Lightsource Sale Talks
BP (LSE:BP.) is in advanced talks to sell its solar arm Lightsource to a Kuwait-backed consortium. This move could reshape the company’s balance sheet and sharpen its focus on core oil and gas activities.
See our latest analysis for BP.
The Lightsource news comes after a mixed period for BP’s stock, with the share price up 20.05% year to date and 11.99% over the past month. The 1 year total shareholder return stands at 36.67% and the 5 year total shareholder return at 120.26%, suggesting longer term momentum has been stronger than the recent 90 day share price decline of 8.72%.
If you are weighing BP’s shift back toward oil and gas, it can also be useful to see what the market is pricing into other energy related opportunities through our 90 nuclear energy infrastructure stocks
BP looks like a solid, cash generative oil and gas business that is shedding a complex solar unit and its debt load. The real question is whether the stock already reflects that cleaner, more focused profile today.
Most Popular BP Narrative: 16.7% Undervalued
BP's most followed valuation narrative points to a fair value of £6.31 against a last close of £5.26. That gap rests on some specific assumptions about future earnings power and cash generation.
The ramp-up of major upstream projects, breakthrough exploration successes in Brazil, West Africa, and other regions, and an ongoing focus on high-return organic growth provide BP with the ability to capture persistent global energy demand growth, particularly from emerging markets, supporting visible revenue and earnings expansion.
Want to see what sits behind that fair value for BP. The narrative leans on steady top line assumptions, fatter margins and a future earnings multiple that has to compress yet still support upside.
Result: Fair Value of £6.31 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, BP's recent impairments in hydrogen and biofuels, along with the heavy focus on upstream oil and gas, could still pressure future returns if projects disappoint.
Find out about the key risks to this BP narrative.
Another View On BP Using Market Multiples
While the popular BP narrative points to undervaluation, the current P/E of 33.6x sits well above the European oil and gas industry at 14.7x, the peer average at 10.8x and even an estimated fair ratio of 22.9x. That gap suggests investors are already paying up, so consider how comfortable you are with that premium.
See what the numbers say about this price — find out in our valuation breakdown.
Next Steps
If the mix of optimism and caution around BP has you unsure, this is the moment to review the data yourself and decide how it stacks up against the 3 key rewards and 3 important warning signs.
Looking for more investment ideas beyond BP
If BP's story has you thinking bigger, this is the moment to widen your watchlist with other stocks that match clear, data driven criteria.
- Target potential mispricings and let valuation work for you through a focused list of 8 high quality undervalued stocks.
- Strengthen your income stream by zeroing in on companies that pay out with consistency using our hand picked 5 dividend fortresses.
- Protect your downside by concentrating on companies that score well on stability and resilience through the 8 resilient stocks with low risk scores.
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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