In the previous part, we discussed institutional holdings in Total (TOT). In this concluding part, we’ll examine Total’s forward valuations compared to its peers.
Currently, Total (TOT) trades at a forward PE of 9.2x, below its peer average of 10.3x. TOT peers Royal Dutch Shell (RDS.A), Petrobras (PBR), and ENI (E) also trade below the average PE at 9.2x, 7.3x, and 7.5x, respectively. In contrast, ExxonMobil (XOM), Chevron (CVX), and Suncor Energy (SU) trade above the average PE at 13.1x, 12.4x, and 10.4x, respectively.
Total (TOT) currently trades at a forward EV-to-EBITDA of 4.4x, above the peer average of 4.0x. ExxonMobil and Chevron also trade above the average forward EV-to-EBITDA at 5.8x and 4.8x, respectively.
What do Total’s valuations signify?
A couple of quarters back, Total traded at a discount to peer averages. However, now Total trades below the average forward PE but above average forward EV-to-EBITDA despite the fact that the stock has lost 21% of its value in the current quarter.
Total’s improving valuations could be attributed to its strengthening upstream portfolio. Total’s hydrocarbon production is slated for growth as major upstream projects come online. Total’s upstream projects like Kaombo in Angola and Train II and III of Yamal LNG in Russia recently began production. The company also acquired Direct Energie and the LNG portfolio of Engie, strengthening its global LNG position. Thus, Total’s improving upstream position could result in better earnings for the company. Wall Street analysts expect Total’s earnings to rise 31% in 2018.
Also, Total has the financial strength to continue its growth spree. Total’s debt-to-capital ratio stood at 32% in the third quarter, below the industry average of 33%. Moreover, Total’s cash flow from operations rose by 31% YoY to $5.7 billion in the quarter, improving its liquidity position.
Overall, Total’s valuation has been improving likely due to its growth activities and strong financials.