Where Do Shell’s Valuations Stand ahead of Earnings?


Aug. 18 2020, Updated 5:27 a.m. ET

Shell’s valuations

In this part, we’ll review Royal Dutch Shell’s (RDS.A) forward valuations ahead of its earnings scheduled on July 26, 2018.

Shell trades at a forward PE of 11.4x, below its peer average of 12.3x. Shell’s peers Total (TOT), Petrobras (PBR), YPF (YPF), and ENI (E) also trade below the peer average. TOT, PBR, YPF, and E currently trade at the forward PE of 11.0x, 7.4x, 9.0x, and 10.7x, respectively.

Moving onto the EV-to-EBITDA ratio, Shell (RDS.A) currently trades at a forward EV-to-EBITDA ratio of 5.5x, above the peer average of 5.0x. Peers ExxonMobil (XOM), Chevron (CVX), and Suncor Energy (SU) trade above the peer average at 7.4x, 6.1x, and 7.3x, respectively.

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Why Shell’s valuations have seen a mixed trend

Shell trades below the forward average PE but above the forward average EV-to-EBITDA. Shell’s valuations have seen a mixed trend, as the company has been marching steadily along a growth path. Plus, its financials have started improving, especially debt levels.

Shell has a robust upstream portfolio. The company has a series of upstream projects that are expected to boost its production growth in 2018 and 2019. Additionally, the growth is coming as oil prices have been improving, which could lead to higher upstream earnings for Shell in the near future.

Earlier, Shell traded below both peer averages due to its debt position, which rose sharply after the BG Group acquisition. However, now Shell’s debt position seems to be improving. In the first quarter, Shell’s total-debt-to-total-capital ratio stood below the peer average of 13 integrated energy companies worldwide. Similarly, Shell’s net-debt-to-EBITDA ratio stood below the peer average in the first quarter. Plus, the net-debt-to-EBITDA ratio has fallen in the past one year.


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