With shares of Chevron Corporation (NYSE:CVX) trading at around $110.10, is CVX 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

Chevron has been the center of much news recently. Most of it has been good news. Chevron has reached a potential settlement of $149 million in relation to an oil spill off the coast of Brazil in 2011. In Ecuador, there is a bigger story. A $19 billion dollar settlement is being sought, but this is most likely a fraudulent case. Chevron has never operated in Ecuador and is highly confident that it has been falsely accused. There is no evidence that Chevron did anything wrong, and nothing pertaining to this case is enforceable in any court of law. Amazingly, at least one plaintiff didn’t even know she was a plaintiff. There is also a good chance that the damages report was ghostwritten. In a nutshell, it’s an illegitimate case against Chevron as well as nothing any investor should worry about.

Catalysts are critical to discovering winning stocks. Check out our newest CHEAT SHEET stock picks now.

In 2013, Chevron plans on spending $37 billion in oil exploration on a global scale. Therefore, there is plenty of potential for growth. By 2017, Chevron would like to increase oil and gas production to 3.3 million barrels per day. This is an obvious attempt to keep pace with the larger companies in the industry. While not as big as an Exxon Mobil (NYSE:XOM), Chevron is working on becoming just as diversified.

The above points are important, but there is much more to explore when it comes to the story of Chevron.

E = Equity to Debt Ratio Is Strong

The debt-to-equity ratio for Chevron is excellent. It’s further proof that this is a well-run company. The balance sheet is also in great shape, which we don’t see often in today’s world.  

 

Debt-To-Equity

Cash

Long-Term Debt

CVX

.09

$21.58 Billion

$12.34 Billion

BP

.41

$16.36 Billion

$49.08 Billion

XOM

.07

$13.26 Billion

$8.93 Billion

 

T = Technicals on the Stock Chart Are Strong

Chevron has outperformed Exxon Mobil and BP (NYSE:BP) over the past three years.

 

1 Month

Year-To-Date

1 Year

3 Year

CVX

7.58%

6.98%

12.85%

58.38%

BP

4.97%

2.97%

6.33%

-17.39%

XOM

7.78%

-14.86%

-9.30%

34.44%

 

At $110.10, Chevron is currently trading above its 50-day SMA and 200-day SMA, but below its 100-day. It’s safe to say that a trading range has been established.      

50-Day SMA

108.70

100-Day SMA

111.03

200-Day SMA

107.60

 

E = Earnings and Revenue Have Been Strong

Revenue and earnings have increased since 2009. This is a common theme for strong companies throughout the broader market.

 

2007

2008

2009

2010

2011

Revenue ($)in billions

220.90

273.00

171.64

204.93

253.71

Diluted EPS ($)

8.77

11.67

5.24

9.48

13.44

 

Looking at the last quarter on a YoY basis, we see a decline in revenue and earnings. However, this shouldn’t rattle any potential investors.  

 

9/2011

12/2011

3/2012

6/2012

9/2012

Revenue ($)in billions

64.43

59.98

60.70

62.61

58.04

Diluted EPS ($)

3.92

2.58

3.27

3.66

2.69

T = Trends Support the Industry

The trend has almost always been good for the oil industry, and there is no reason for that trend to change in the future. Even if oil becomes less important (not likely anytime soon,) companies like Chevron are becoming more diversified so they’re prepared for the future.

Conclusion

The majority of the information above makes a bullish case for Chevron, but that’s not all. There are other positive to consider, which include a profit margin of 10.70 percent, operating cash flow over $35 billion, a Forward P/E of 9.05, the vast majority of analysts on the Buy side, and 25 straight years of dividend increases. Chevron is an OUTPERFORM.

Copyright Wall St Cheat Street All rights reserved.