Is It Still Safe To Buy BP Plc?

I'm always searching for shares that can help ordinary investors like you make money from the stock market. However, many people are currently worried the market has been overheating.

So right now I'm analysing some of the most popular companies in the FTSE 100, hoping to establish if they can continue to outperform in today's uncertain economy.

Today I'm looking at oil major BP (LSE: BP) (NYSE: BP.US) to determine whether the shares are still safe to buy at 454p.

So, how's business going?

One of the biggest problems still facing BP is the possibility of crippling penalties stemming from the Gulf of Mexico disaster. Unfortunately, it does not look as if this issue is going to be resolved any time soon.

Indeed, the company is still fighting what it calls fictions compensation claims from individuals and business in the region, and has yet to reach a final settlement with all parties concerned.

That said, while the legal battle continues, BP is working hard to rebuild itself and return to full health. In particular, the firm is selling non-core assets such as the company's Texas City refinery and share of the well-publicised TKN-BP joint venture, to streamline operations.

However, these divestments are impacting the company's oil output, which was 5% lower in the first quarter of this year, compared to the same period in 2012.

Nonetheless, BP's management remains proactive and is searching for assets to boost the company's output. The company is on target to start production from four upstream assets this year, with a further 25 explorations wells planned.

Expected growth

Until BP reaches an agreement with all parties concerned in the Gulf of Mexico disaster, the company's future is uncertain. Still, City analysts currently expect BP's earnings to remain almost unchanged for the next two years.

City forecasts currently predict earnings of $0.84 per share for this year (a fall of 8%) and $0.92 for 2014.

Shareholder returns

BP is retuning $8 billion of the $27.5 billion it received from the sale of its share in joint venture, TKN-BP to shareholders by way of a share buyback this year.

In addition, the company's dividend yield is currently 4.9% -- larger than that of its peers in the oil & gas producers sector, which currently offer an average dividend yield of 4.1%.

Valuation

Surprisingly, despite to the uncertainty surrounding the company's future, BP trades at a premium to its peers. BP currently trades at a historic P/E of 11.3, while its peers trade on an average historic P/E of around 8.5.

Foolish summary

Overall, BP is working hard to return to full health but the company still faces a lot of uncertainty concerning its role in the Macondo Well disaster.

So, all in all, I feel that BP does not look safe to buy at 454p.

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In the meantime, please stay tuned for my next FTSE 100 verdict