How Occidental Shares Stack Up After 13% Drop Amid Oil Market Turbulence

Are you on the fence about Occidental Petroleum? It’s understandable, as this is a stock that tends to spark debate among investors, especially after a string of volatile price swings. In just the past month, Occidental’s share price dropped 13.3%, and year-to-date, the slide is a hefty 17.9%. Looking back over the last year, shares are down 19.2%, and for those with longer memories, the three-year return sits at -39.9%. However, before you write off Occidental, it’s worth noting that the five-year return is still a staggering 330.9%, a number that stands out in the energy sector.

Some of this turbulence is tied to ongoing shifts in the oil and gas market, with headlines about global supply cuts and evolving energy demand causing investors to rethink risk and growth. Occidental’s latest valuation score is a solid 4 out of 6, meaning it’s considered undervalued in four separate metrics. That kind of result isn’t easy to ignore, especially if you’re weighing whether the current pullback represents a warning sign or a potential opportunity.

So, how do you decide if now is the right time to jump in or stay on the sidelines? Let’s walk through how analysts size up Occidental’s valuation using multiple tried-and-true methods, and stay tuned for one perspective that might give you an even clearer view of the stock’s true worth.

Why Occidental Petroleum is lagging behind its peers

Approach 1: Occidental Petroleum Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company's intrinsic value by projecting its future cash flows and then discounting those expected flows back to today’s dollars. This provides a present value based on what the business is likely to generate in free cash over time.

For Occidental Petroleum, this involves examining the latest Free Cash Flow (FCF), which stands at $5.6 Billion, and using both analyst forecasts and extrapolated trends to estimate its potential trajectory in coming years. Analysts provide detailed projections for up to five years, with 2029’s FCF estimated at around $4.9 Billion. Beyond that window, data is extended by modeling longer-run assumptions, such as ongoing growth at more conservative rates.

By discounting each year’s forecasted cash flows, the DCF model calculates an intrinsic value of $89.40 per share. Compared to the current share price, this indicates that Occidental is trading at a steep discount, with the DCF suggesting the stock is approximately 54.3% undervalued.

If you believe these forecasts are reasonable, this model signals a significant gap between what the market is currently pricing in and the business’s fundamental earning power.

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Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Occidental Petroleum.OXY Discounted Cash Flow as at Oct 2025

Our Discounted Cash Flow (DCF) analysis suggests Occidental Petroleum is undervalued by 54.3%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Occidental Petroleum Price vs Earnings

For profitable companies like Occidental Petroleum, the Price-to-Earnings (PE) ratio is often the valuation tool of choice. This metric reveals how much investors are willing to pay today for a dollar of current earnings and is especially useful for comparing firms with steady or growing profits.

It's important to note, however, that a "fair" PE ratio isn't the same for every company. Higher PE ratios are generally warranted for businesses with stronger growth outlooks, lower risk, or superior profit margins. Lower growth or higher risk companies will tend to trade at lower multiples.

Occidental’s current PE ratio sits at 23.27x, which is notably above the oil and gas industry average of 12.58x but below the average among peers at 30.89x. To determine what multiple really makes sense, Simply Wall St calculates a "Fair Ratio" in this case, 20.13x which accounts for Occidental’s specific growth profile, margins, size, and risks.

The Fair Ratio method is a stronger benchmark than peer or industry comparisons alone since it is tailored to the unique qualities of Occidental rather than a generic group. By comparing the actual PE of 23.27x against the Fair Ratio of 20.13x, it appears the stock is valued a bit above the level justified by its fundamentals.

Result: OVERVALUEDNYSE:OXY PE Ratio as at Oct 2025

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

Upgrade Your Decision Making: Choose your Occidental Petroleum Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is your story about a company that connects your expectations for its future, such as revenue growth, margins, and fair value, to a concrete investment thesis. This approach links the numbers with your own outlook, turning the financial forecast into a living snapshot of your perspective on the business’s direction and value.

On Simply Wall St’s Community page, millions of investors use Narratives to easily create and refine their opinions on Occidental Petroleum. This makes it simple to test a scenario, such as believing in breakthrough earnings from carbon capture technology or, conversely, predicting slow growth due to persistent oil price volatility. Narratives empower you to track how your assumptions stack up by automatically updating fair value estimates as new data or news emerges, so your view stays relevant and timely.

For example, some investors forecast a fair value as high as $64 per share if Occidental’s carbon initiatives succeed and oil markets stay strong. Others set their fair value closer to $40, reflecting caution over industry risk and execution challenges. Narratives help you visualize where your conviction stands on that spectrum, so you can make investment decisions rooted in both data and your own informed story.

Do you think there's more to the story for Occidental Petroleum? Create your own Narrative to let the Community know!NYSE:OXY Community Fair Values as at Oct 2025

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.

Companies discussed in this article include OXY.

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