US oil major Chevron (NYSE: CVX) has been having a good run of it lately. Not only is Chevron stock up 82% over the past five years, it has jumped 13% in the past month alone. Ongoing geopolitical uncertainty has raised questions about what might happen to energy prices, feeding investor appetites.

On top of that, the share yields 4.1%.

On this side of the pond that is already attractive, as it is well above the current FTSE 100 average. For a US stock, it is notably high, as the current yield of the S&P 500 index (of which Chevron is a member) sits at just 1.1%.

Long-term cash generation potential

The past few years have brought into question what the long-term demand picture for oil looks like.

But with growing populations, increasing energy demands, and a more ambivalent approach towards moving away from fossil fuels than a few years ago, I think oil demand will stay high for the foreseeable future.

I am happy to own oil stocks and have done so in the past. Might it make sense for me to buy some Chevron stock now?

To decide, I weigh several questions. One is whether this is the right point in the oil cycle to buy shares. Oil tends to be cyclical and shares are often best value when oil prices have crashed or are very low. That is not the case now.

Another question I ask is what oil companies to buy.

Berkshire Hathaway built up a large holding of Chevron stock under Warren Buffett.

Like Buffett, I like companies such as Chevron that I think have serious cash generation potential over the long run. I see Chevron as a solidly run company with attractive assets and long-term growth potential.

So it would certainly be on my consideration list, alongside other oil stocks I have owned in the past such as ExxonMobil.

Valuation looks stretched

Another question I ask myself is whether a share is attractively valued.

Here I find Chevron less compelling as a potential buy for my portfolio. The current price-to-earnings ratio is 24.

That is markedly more expensive than the equivalent 19 at ExxonMobil, or 15 for UK rival Shell.

My concern here is the cyclical nature of of oil pricing I mentioned above.

If prices go up, that could help Chevron grow its earnings. On that basis, the prospective valuation may be more attractive than it currently seems.

Weighing risks and rewards

But oil prices, though not especially high right now, still sit well above where they have been at some points over the past decade.

A fragile and fast-shifting geopolitical environment may push them up in coming months and years. But it could equally send them downwards, hurting oil companies’ earnings. That is the main risk that bothers me.

I do not want to overpay for Chevron stock and see a risk that I could do so buying at the current price, bearing in the mind the possibility of an oil price slump in coming years.

So, although I think Chevron stock could move up further if oil prices rise, I will not be investing.