The Woodside Energy Group Ltd (ASX: WDS) share price has been an incredible performer amid the significant increase in energy prices.
As the chart below shows, the Woodside share price has soared by 60% in the past year.
The ASX oil and gas share doesn’t have much control over energy prices, but it has significant operating leverage when resource prices do increase.
It costs Woodside roughly the same to produce each ‘barrel’ of its resources month to month, but when revenue rises that largely adds to net profit (aside from paying more to the government).
Investors usually value a business based on how much earnings it’s expected to generate, so the recent increase in potential profitability has been great news for owners of Woodside shares.
How many Woodside shares we can buy with $10,000
A year ago, we would have been able to buy 501 Woodside shares â the world has changed a lot since then.
A $10,000 investment a year ago would have turned into around $16,000 today, plus a couple of solid dividend payments.
As I mentioned above, the Woodside share price has risen close to 60%. These days, an investment with $10,000 would only buy 312 Woodside shares.
It’s important to ask whether it’s good value today or not because it has already risen. Is it more likely to rise or fall from here? The US certainly wants the normal global fuel supply to return to normal.
Is the ASX oil and gas share a buy?
Analysts are currently mixed on the business. According to CMC Invest, there have been nine recent ratings with only two of those being a buy. Five of the ratings were hold and two were a sell.
The average price target of those nine ratings was $31.48, suggesting (at the time of writing) a slight decline for the Woodside share price over the next year.
The most optimistic price target is $36.50, suggesting it could rise 14% over the next 12 months. However, the most negative price target is $24.75, suggesting it could fall more than 20%.
If investors are thinking about buying Woodside shares, I’d suggest it’s important to consider how long energy prices are going to stay elevated. I’m not expecting it to go much higher in the foreseeable future, meaning I think there are better opportunities out there.
The post 5 years ago, $10,000 bought 501 Woodside shares. But how many would it buy now? appeared first on The Motley Fool Australia.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.