How Does Petrobras’s Forward Valuation Compare to Peers?



Petrobras’s competitors

In the earlier part, we discussed Petrobras’s (PBR) appointment of Pedro Parente as its new CEO and its latest quarterly performance. In this part, we’ll consider Petrobras’s forward valuations compared to its peers.

Before we proceed with the peer comparison, let’s consider the market caps of integrated energy companies. Petrobras’s market cap stands at ~$38 billion. Among the company’s peers, ExxonMobil (XOM) has the highest market cap of ~$374 billion. Chevron (CVX), Total SA (TOT), and YPF SA (YPF) have market caps standing at ~$188 billion, ~$118 billion, and ~$8 billion, respectively. For exposure to the integrated energy sector, you can consider the Vanguard Energy ETF (VDE). The ETF has ~36% exposure to integrated energy sector stocks.

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Petrobras’s forward valuations

Petrobras is now trading at a two-year forward EV/EBITDA of 5.1x below its peer average of 5.4x. Petrobras’s peers like BP (BP), Royal Dutch Shell (RDS.A), ENI (E), and YPF (YPF) are also trading below the peer average. But ExxonMobil (XOM) and Chevron (CVX) are trading above the average.

Why does Petrobras trade at a discount to XOM and CVX?

Petrobras trades at a discount to peers like XOM and CVX mainly due to its heavy indebtedness and debilitating scandals that have shaken investor confidence in the company. Petrobras’s total debt to capital ratio stands at 66% compared to XOM’s and CVX’s average of 19%. The steep rise in Petrobras’s leverage is a major weight on the stock compared to its peers.

In the next part, we’ll discuss analyst recommendations on the stock.


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