Since February 2026, California Resources has been in a holding pattern, posting a small loss of 3% while floating around $52.62. The stock also fell short of the S&P 500’s 8.3% gain during that period.
Does this present a buying opportunity for CRC? Or is its underperformance reflective of its story and business quality? Find out in our full research report, it’s free.
Why Does CRC Stock Spark Debate?
Operating some of California's most productive oil fields including Elk Hills and Belridge, California Resources (NYSE: CRC) explores for and produces crude oil, natural gas, and natural gas liquids from fields across California.
Two Positive Attributes:
1. Skyrocketing Revenue Shows Strong Momentum
A company’s long-term performance can give signals about its business quality. Even a bad business, especially in a cyclical industry, can shine for a year or so, but a top-tier one should exhibit resilience through cycles. Luckily, California Resources’s sales grew at an impressive 17.3% compounded annual growth rate over the last five years. Its growth beat the average energy upstream and integrated energy company and shows its offerings resonate with customers.
2. Elite Gross Margin Powers Best-In-Class Business Model
In a single quarter or year, gross margins in the sector can swing wildly due to commodity prices, hedging, or changes in labor costs. Over a multi-year period across different points in the cycle, gross margin differences can signal whether a company is a structurally-advantaged producer (“rock” quality, takeaway, operating costs) or not.
California Resources, which averaged 57.2% gross margin over the last five years, exhibits good unit economics in the sector. It means the company will remain profitable at lower commodity prices than peers with inferior gross margins and serves as an encouraging starting point for ultimate operating profits and free cash flow generation.
One Reason to Be Careful:
Shrinking EBITDA Margin
Adjusted EBITDA margin is an important measure of profitability for the sector and accounts for the gross margins and operating costs mentioned previously. Unlike operating margin, it is not distorted by accounting conventions around reserves, drilling costs, and assumptions on commodity consumption from the well or basin. Adjusted EBITDA highlights the economic reality of how much cash the rock produces before the capital structure (debt service) and the drilling budget (capex) are considered.
Looking at the trend in its profitability, California Resources’s EBITDA margin decreased by 7.8 percentage points over the last year. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Its EBITDA margin for the trailing 12 months was 33.3%.
Final Judgment
California Resources has huge potential even though it has some open questions. With its shares underperforming the market lately, the stock trades at 10.3× forward P/E (or $52.62 per share). Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
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