Learn the stock market › Sectors › Lesson 3 of 6

Key numbers for commodity companies

Short answerAn oil company, a miner or a chemicals maker sells a product priced on the world market. The cost of running wells, mines and plants is about the same whatever the price, so when the price rises almost all of the increase becomes profit, and when it falls the profit goes just as fast. Over the last four years the gap between the highest and lowest operating margin was 7.9 percentage points in the middle, against 5.3 percentage points for industrial companies.

Commodity companies in numbers

Company	Lowest margin	Highest margin	P/E
Linde	19.4%	27.2%	34.2
Exxon Mobil	10.5%	16.1%	17.1
Chevron	9.0%	17.0%	15.6
Middle of all 101 companies	18.3%	27.3%	23.6

Lowest and highest operating margin over the last four fiscal years. The middle is counted on the largest US companies. Latest fiscal year, price on Nov 6, 2026. A dash means the number is missing.

Why a commodity company looks different

Others set the price. A barrel of oil or a ton of copper is much the same wherever it comes from, so a company cannot charge more for its brand. What commodities are and how they trade is in the lesson on commodities.

Fixed costs. A well or a mine costs about the same to run at a low price as at a high one. So the operating margin swings more than for most other companies. The highest margin over four years was 17.0% in the middle, and the lowest 10.5%.

P/E turns the picture around. When prices are high, profit is large and P/E low, and when prices are low it is the other way round. A low P/E in a peak year is the second trap in the lesson on valuation traps. That is why many work with profit over several years.

Debt in a bad year

A company with large loans has to pay the interest in the year the price is low too. So debt matters more for a company with swinging profits than for one with steady profits. How debt is measured against profit is in the lesson on debt.

Four years is a short time. A fall in prices that lasts longer than that does not show in the table.

Test yourself

A miner has a P/E of 6 just as the copper price is the highest in ten years. What should you ask?