Replies to post #79754 on Biotech Values

[DewDiligence]

Quiz answer: debt

Correct! “Leverage” would also have been a correct answer.

The main difference between COP and the other companies in the peer group is that COP’s large debt load gives it more financial leverage. Thus, when oil prices rise, COP’s profitability increases at a proportionally higher rate than the profitability of its rivals. Similarly, when oil prices fall (as they did in the past year), COP’s profitability decreases at a proportionally higher rate than the profitability of its rivals.

Over the past 10 years cumulatively, oil prices have risen and COP’s 10-year annual compounded shareholder return of 12% tops the peer group.