Is Petrobras’s Stock a Buy Now?

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With shares of Petrobras (NYSE:PBR) trading at around $18.13, is PBR a Buy, a Wait and See, or a Stay Away? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

Petrobras is one of the most interesting stock stories over the past few years. It wasn’t long ago this massive Brazilian energy company made the largest oil find in history. That was the main contributor for a meteoric rise in the stock price. It’s up around 900% since its 2000 IPO. However, it’s always important to remember stats can be misleading.

For example, the only timeframe in which PBR has outperformed Exxon Mobil (NYSE:XOM) is the all-time duration. Otherwise, XOM has dominated this competition. Over the past five years, PBR is down 60% while XOM is close to even. Over the past two years, PBR is down over 41% while XOM is up over 25%. Over the past year, PBR is down approximately 25% while XOM is up approximately 20%. PBR also has a 1.30% yield while XOM sports a 2.60% yield.

All of that excitement about the largest oil find in history ended up being a sell-on-the-news event. That said, this isn’t completely the fault of Petrobras. Actually, the company has had little to do with the stock’s decline. The primary reason for the poor stock performance has a lot to do with the government putting a cap on oil prices to fight inflation. You shouldn’t expect the Brazilian government to bend anytime soon considering the strong public pressure to fight inflation. Another key problem: the government owns 64% of the company and has directors on the board. None of this is good news.

E = Debt to Equity Ratio is Normal

Petrobras has a debt-to-equity ratio of .54, which is low. While that’s a solid number, Exxon Mobil wins again. XOM has a debt-to-equity ratio of .07. BP Global (NYSE:BP) has a debt-to-equity ratio of .41.

Petrobras has $26.03 billion in cash and $91.87 billion in debt. These numbers aren’t great, but assets are more than double liabilities. Exxon Mobil has $13.26 billion in cash and $8.92 billion in debt. This is yet another area where XOM is more impressive. BP Global has $16.36 billion in cash and $49.08 billion in debt…

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