At today's price, Occidental's stock is pricing in about 4.9% annual free-cash-flow growth for the next ten years — a modest bar. But the company's actual FCF shrank at -14.2% a year over the past five years, meaning the current price still bets on a real reversal, not just modest growth.
At its current price, OXY implies ~4.9% annual FCF growth for the next 10 years, discounted at 10%.
Occidental's actual 5-year FCF growth was -14.2% a year — it fell, from $7.6B (2021) to $4.1B (2025).
Required growth vs. historical growth
Required growth from the reverse DCF below. Historical figures are CAGRs. Only the market's ask is positive — every historical comparison points the other direction. The "2-yr continuing ops" figure compares only the business remaining after the OxyChem sale, and is actually worse — reflecting 2025's weak oil prices.
Sensitivity: what if the discount rate moves?
| WACC | Required growth | Note |
|---|---|---|
| 8% | +0.7% | Essentially "flat" growth would justify the price |
| 10% (base case) | +4.9% | Typical large-cap assumption |
| 12% | +8.5% | Arguably more appropriate given commodity-business volatility |
Because Occidental's results swing heavily with oil prices, some argue a higher discount rate (11-12%) fits better than the standard 10%. At 12%, the required growth rate rises to 8.5%, widening the gap with the actual historical trend considerably.
What would move this number
- Using the 3-year average FCF ($5.30B) instead of 2025's standalone figure ($4.11B) lowers the required growth rate from 4.9% to 1.4% at a 10% discount rate — looking only at 2025, a year of weak oil prices, can make the market's expectations look larger than they really are.
- Using year-end 2025 net debt (~$20.4B, before OxyChem proceeds were applied) instead of the most current figure (~$7.6B, per the Q2 2026 call) raises the required growth rate from 4.9% to 7.3%.
- Treating Berkshire Hathaway's preferred stock ($8.29B book value, redeemable August 2029) as debt-like and including it in net debt raises the required growth rate from 4.9% to 6.5%.
Show your work
Inputs, sources, model assumptions, and the calculation
- Share price$59.10 — stockanalysis.com, Aug 28, 2026 close
- Shares outstanding999.64M — stockanalysis.com, consistent with $59.1B market cap
- Base FCF (2025)$4.105B — 10-K FY2025 cash flow statement, p.63: $10,532M operating cash flow minus $6,427M capex
- Net debt$7.6B — Q2 FY2026 earnings call CFO remarks ($11.8B principal debt minus $4.2B cash built up)
- Discount rate (WACC)10% base case (8%/12% tested)
- Terminal growth rate2.5% — long-run GDP-level assumption
Normalization note: 2025 FCF ($4.11B) is 22.5% below the 3-year average ($5.30B, continuing-operations basis) — short of the ±40% normalization threshold. But 2025 combined a cyclical factor (lower average oil prices) with a structural one (the OxyChem sale restating 2023-2025 on a continuing-operations basis) — not a one-time event, but a genuine business change worth flagging. This analysis uses 2025's standalone figure as the base case per standard practice, with the 3-year average shown separately as a sensitivity scenario above.
Model: free cash flow is assumed to grow at a constant annual rate g for 10 years, then at a 2.5% terminal rate thereafter, solved by bisection for the value of g that equates present value to today's target enterprise value (market cap $59.1B + net debt $7.6B = $66.7B).
Historical CAGR check: 5-yr FCF CAGR = ($4.105B ÷ $7.564B)^(1/4) − 1 = -14.2%. Note the 5-year window spans a structural change (the FY2021-2024 figures include the now-divested chemicals business, while 2025 excludes it) — so this CAGR mixes "results got worse" with "the business got smaller." The 2-year continuing-operations-only comparison (2023→2025, -21.2%) isolates the pure operating trend, and is worse.
The fine print
- This isn't a fair-value price target — it only shows what the current price already assumes.
- Change the discount rate, the FCF base, or how net debt is defined, and the answer moves substantially — see the sensitivity table and "what would move it" section above.
- A reverse DCF shows what the market currently expects — it does not say what the stock is "worth."
- Whether 4.9% growth is realistic depends on oil-price stability, STRATOS's commercial timeline, and the pace of debt repayment — the key variables covered in the story piece above, not on this math alone.
- Any investment decision, and its outcome, is your own responsibility.
Frequently asked questions
What growth rate does OXY's stock price assume?
At today's price, Occidental's stock is pricing in about 4.9% annual free-cash-flow growth for the next ten years, at a 10% discount rate.
How does that compare to Occidental's actual growth?
Occidental's actual FCF shrank at -14.2% a year over the past five years (2021-2025, from $7.6B to $4.1B) — the required 4.9% growth is a direct reversal of that trend, not just an acceleration of it.
What share price was used for this analysis?
This analysis used $59.10, as of the Aug 28, 2026 close.