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Analysis of Petróleo Brasileiro

Analysis of Petróleo Brasileiro

16 March 2022

Petrobras is a Brazilian vertically integrated multinational corporation, whose activities are divided into 3 areas:

– Oil exploration and production

– Oil refining and transportation

– Gas and energy production

The company has been producing oil on land and on water since 1953, including deep-sea production technologies.

The covid crisis of 2020 has had a strong impact on Petrobras. In 2020, it lost almost half of its revenue and almost all of its net profit. However, Petrobras managed to recover financially and last year showed a large profit with less revenue. Gross and net margins in 2021 were noticeably higher than those of competitors in the industry.

The basis of the company’s sales are diesel, gasoline and LNG. The company earned $61 billion in the Brazilian market, $21 billion abroad.


P/E 4.6, forward P/E 5.7 (current average by competitors 28.9)

P/B 1.3 (industry average 1.6)

P/S 1.1 (industry average 1.3)

Debt $84 billion with current operating cash flow of $37 billion

Dividends $2.04, yield 14.84% per annum!

Stock Price: $13

The cash flow discounting model shows a fair price of $25.90.

Simply Wall Street estimates the company at $23.13.

One analyst leading the company gives an estimate of $14.20.

Petrobras has done a very good job with the debt, reducing it by almost 4 times in 5 years. In 2021, the assets already exceeded the debt.

Until last year, the company also paid almost no dividends, having sharply increased them for 2021, and current oil prices promise further growth, because the company can afford to pay them without straining finances. Dividends make up 59% of income and 37% of free cash flow.

The stock is trading above the 50 and 200 day moving average and below the 20 day MA. Stocks have tripled since March 2020, since then the current correction is the fourth. However, the chart has not even reached pre-Covid highs yet, so the next wave of growth will go to $16.

Conclusion: Petrobras is an excellent option for diversification with American oil companies. The company pays high dividends and may increase them as the price of oil is above $100 per barrel and continues to grow. In terms of the price-to-profit ratio, Petrobras is grossly undervalued, just because it is located in Brazil. Being away from the military conflict in Europe, Brazilians are the beneficiaries of the current situation. Stocks will not fall rapidly – they are protected by high dividends and high oil prices, as well as good financial performance.

16 March 2022
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