The shares of Petroleo Brasileiro S.A.- Petrobras (NYSE:PBR-A) and Denbury Resources Inc. (NYSE:DNR) were among the active stocks of the last trading sessions. Petroleo Brasileiro S.A.- Petrobras (NYSE:PBR-A) declined to -3.34% closing at the price of $13.32 whereas the shares of Denbury Resources Inc. (NYSE:DNR) declined -5.85% with the decrease of -0.35 points closing at the price of $5.63. Petroleo Brasileiro S.A.- Petrobras has currently increase 8% in its stock over the period of 6-months while its rival Denbury Resources Inc. added 90.85% in the previous 6-months.
Now we have to analyze the facts that if the stocks were worthy off investors’ money? The facts to analyze here are risks, profitability, returns and price trends.
Returns and Profitability
Profitability and returns are the main reason of investment, the investors are looking for profits that they get and return they should expect over the period of time.
The first and foremost return that is considered while making an investment is the ROI or Return on Investment. The ROI is the ratio between the profit against the cost of investment. Currently the ROI of Petroleo Brasileiro S.A.- Petrobras (NYSE:PBR-A) is 0% while the ROI of Denbury Resources Inc. (NYSE:DNR) is 5.6%. Another figure that is to be considered while analyzing the profitability of a share is its EBITDA margin, PBR-A’s EBITDA Margin is 6.54 whereas DNR’s is 15.15.
Both the profitability ratios suggest that Denbury Resources Inc. (NYSE:DNR) is more suitable investment in terms of profitability and return.
EPS & Surprise Factor
Petroleo Brasileiro S.A.- Petrobras (NYSE:PBR-A) reported $0.43/share EPS for the previous quarter where analysts were predicting an EPS to be $0.04/share Thus beating the analyst Estimates with a Surprise Factor of 975 Percent. While, Denbury Resources Inc. (NYSE:DNR) reported EPS of $0.13/share in the last quarter. The analysts projected EPS of $0.11/share depicting a Surprise of 18.2 Percent.
Taking a look at Earnings per Share, Petroleo Brasileiro S.A.- Petrobras tends to be beating the analyst estimates more than Denbury Resources Inc.. so PBR-A is more profitable than DNR.
EPS Growth Rate: PBR-A’s 0% versus DNR’s 32.6%
Another shareholder value can be analyzed through the EPS growth rate; the next 5 years EPS growth rate is predicted by the analysts after the analyzing the previous trends. The next 5 year EPS growth rate of Petroleo Brasileiro S.A.- Petrobras (NYSE:PBR-A) is predicted at 0% while Denbury Resources Inc. (NYSE:DNR) stands at 32.6%. These numbers suggest that DNR is more suitable investment in terms of EPS growth rate.
Financial Risk and Liquidity Concerns
The current ratio and the debt ratio are the two ratios that show the investor how quickly the company is able to payout its debt and how quickly it can cover its obligations. The current ratio of PBR-A stands at 0 while DNR is at 0.4 whereas the debt ratio of the prior is 0 while the debt ratio of the later is 3.16.
The values of the both ratios suggest that DNR is more suitable investment when the liquidity and risk is the main concern.
While making an investment, another main factor to consider before investing is the analyst recommendation on the scale of 1 to 5 where 1 is strong buy, 2 is buy, 3 is hold, 4 is Sell and 5 is strong sell. Analyst recommend 2.8 for PBR-A and 2.7 for DNR which means PBR-A has Hold rating whereas DNR has Hold rating.
Another recommendation of analyst that is to be considered worthy is the price target. The mare price or price trend does not suggest the suitability of a stock. The price target set by analyst is also to be considered while investing as it suggests to what extent the stock will rise or fall in the near future. The price target set for PBR-A is $12.24 which is -8.82% of its current price while DNR has price target of 5.45 which is -3.3% of its current price.
Valuation is the process of determining the company’s worth for an investor, the valuation ratios give an insight to that worthiness.
PBR-A currently has price to earning P/E ratio of 27.87 whereas DNR has 39.65 while the forward P/E ratio for the prior stands at 6.59 and for the later it depicts the value of 7.37.
The price to Book P/B for PBR-A is 1.17, Price to Sale is at 1.07 and for DNR these ratios stand at 2.76 and 1.95.