Petrobras is the most discounted oil company among oil giants

One of the most observed indicators by the market to assess whether a share is expensive or cheap, the EV/Ebitda shows that Petrobras shares have the biggest discount among the largest oil companies in the world.

The EV/Ebitda of the state-owned company is 3.1 times, against 6.8 times for the Americans Chevron and ExxonMobil, which lead the list. Next comes the British Shell, with 4.6, followed by the French Total, with 3.8 and British Petroleum (BP), also with 3.8 times.

The EV is the Enterprise Value —or company value—, and it shows the company’s market value. Ebitda, on the other hand, shows cash generation. In other words, the higher the indicator, the further away the value of the shares is from what it generates in cash. The lower the ratio, the closer the share value to cash generation.

This means that with the lowest EV/Ebitda ratio, it is possible to say that Petrobras is the company whose shares have the lowest value, considering its ability to generate cash. Chevron and Exxon, on the other hand, have the furthest value from generating revenue. Therefore, Petrobras is the most “discounted” stock and the American oil companies the most “stretched”, as analysts say.

João Lorenzi, an oil analyst at the manager Encore, says that the reason that explains the Petrobras discount is the political risk. “We saw a movement of ‘derating‘ at Petrobras, which is when the company starts to see its EV/Ebitda drop consistently. That is, the market begins to ‘pay less’ for the company because, among other reasons, it sees greater risks in the investment,” he said.

“Before the Dilma era, Petrobras used to have an average EV/Ebitda of 5.5 times. This number rose to 4.5 times in the Temer era and dropped to something close to 2 times, if we consider dividends, in the Bolsonaro era. The movement was seen in all oil stocks due to the energy transition, but it was much more intense in Petrobras because the risk of interference is always hanging in the air”, added the analyst.

Encore has Petrobras shares in its portfolio, but Lorenzi points out that investors thinking about investing in Petrobras must keep in mind that the shares are very volatile, precisely because of the risks of political interference.

Despite the discount against peers, Paulo Bittencourt, a financial consultant, does not recommend the purchase of Petrobras shares “due to the high additional volatility that government interference has generated”.

“The common investor has to take into account that he will be in the midst of gigantic buying and selling movements, mainly of ADRs executed by stock exchange professionals”, he says.

For Bittencourt, there are better alternatives for long-term investments in the oil and gas segment, such as Chevron and ExxonMobil. “Some of them are already traded in Brazil as BDRs. Leave speculation to those who live off of it and take the risks”, he recommends.