PBR - The Petrobras Absurdity: Yield Exceeds P/E
2024-05-05 09:33:00 ET
Summary
- Petrobras stock currently has a 7% dividend yield and a low P/E ratio of 4x.
- Thus, PBR stock offers an attractive package combining value, current income, and international exposure.
- I disagree with the consensus estimates of its EPS growth, which are too pessimistic given the catalysts I am seeing.
- With its single-digit P/E ratio and the market’s pessimistic sentiment, any EPS growth has the potential to trigger an outsized price rally.
PBR stock: 7% yield and 4x P/E
My last two articles on Petróleo Brasileiro S.A. (NYSE: PBR ) were published in late 2022 and early 2023. As seen in the chart below, I argued for a bullish thesis on the stock in both areas. My bullish thesis at that time was largely motivated by geographical diversification and also the expectation for robust oil pricing given the Russian/Ukraine war. Quote:
The Petrobras Absurdity: Yield Exceeds P/E
Firstly and obviously, as an international company, PBR provides geographical diversification, which is particularly advantageous for investors who are primarily exposed to the U.S. market only.
Additionally, PBR is well-positioned to benefit from the current commodity cycle in the next 3~5 years. In the near term, the ongoing conflict in the Russian/Ukraine region should keep oil prices high and provide support for their business.