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Total’s Valuation Trends: How Does It Compare with Its Peers?

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Total’s valuation: Lower than historical means

Total (TOT) traded at an average adjusted PE (price-to-earnings) ratio of 11.9x from 4Q13 to 4Q15. The PE ratio measures the company’s price per share as a multiple of earnings per share.

In 3Q15, TOT traded at its highest PE of 13.7x. This was due to a steeper fall in earnings than stock price. However, the ratio tapered down to 10.6x in 4Q15. Between 4Q13 and 4Q15, TOT’s earnings were squeezed due to low crude oil prices. This is despite the fact that its refining and chemical earnings improved significantly. TOT currently trades at a PE of 10.1x, lower than its historical means.

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TOT’s price-to-cash flow ratio

Between 4Q13 and 4Q15, Total’s adjusted EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) and price-to-cash flow ratios stood at averages of 5.1x and 4.9x, respectively. These ratios are subject to market fluctuations and the company’s performance. EV (enterprise value) is measured as market capitalization plus debt minus cash. EV reflects the theoretical purchase value of the entire company.

In 3Q15 and 4Q15, Total’s adjusted EV-to-EBITDA and price-to-cash flow ratios saw highs of 6.2x and 5.2x, respectively. The higher valuation was due to lower EBITDA (earnings before interest, tax, depreciation, and amortization) and cash flows. Currently, TOT trades at an adjusted EV-to-EBITDA ratio of 4.6x and a price-to-cash flow ratio of 4.9x. Like PE, TOT’s current adjusted EV-to-EBITDA is lower than its historical average.

However, TOT’s current price-to-cash flow ratio is equal to its historical average. TOT’s peer Chevron (CVX) is currently trading at a price-to-cash flow ratio of 8.2x, higher than its historical average. On the other hand, TOT’s peers BP (BP) and Royal Dutch Shell (RDS.A) are currently trading at price-to-cash flow ratios of 4.6x and 4.9x, respectively, lower than their historical averages. For exposure to the integrated energy sector, you could consider the iShares US Energy ETF (IYE). The ETF has a 47% exposure to the sector.

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