PBR

Shares of PBF Energy Break Trend as Prices Fall to $12.6.

Standing out among the Street's worst performers today is PBF Energy, a oil & gas integrated company whose shares slumped -3.5% to a price of $12.6, 23.43% below its average analyst target price of $16.45. The average analyst rating for the stock is buy.PBR underperformed the S&P 500 index by -4.3% during today's afternoon session, but outpaced it by 55.1% over the last year with a return of 34.3%.

Petróleo Brasileiro S.A. - Petrobras explores for, produces, and sells oil and gas in Brazil and internationally. The company is an energy company. As investments, energy companies may display higher than average volatility because the price and availability of basic materials needed for production is dependent on geopolitical events. The shift towards renewable forms of energy may lessen this dependency, but is far from complete and may involve new risks of its own.

PBF Energy's trailing 12 month P/E ratio is 2.6, based on its trailing Eps of $4.84. The company has a forward P/E ratio of 3.3 according to its forward Eps of $3.77 -- which is an estimate of what its earnings will look like in the next quarter. The P/E ratio is the company's share price divided by its earnings per share. In other words, it represents how much investors are willing to spend for each dollar of the company's earnings (revenues minus the cost of goods sold, taxes, and overhead). As of the third quarter of 2022, the energy sector has an average P/E ratio of 9.11, and the average for the S&P 500 is 15.97.

One limitation P/E ratios is that they don't tell us to what extent future growth expectations are priced into PBF Energy market valuation. For example, a company with a low P/E ratio may not actually be a good value if it has little growth potential. On the other hand, it's possible for companies with high P/E ratios to be fairly valued in terms of their growth expectations.

Dividing PBF Energy's P/E ratio by its projected 5 year earnings growth rate gives us its Price to Earnings Growth (PEG) ratio of -0.14. Since it's negative, either the company's current P/E ratio or its growth rate is negative -- neither of which is a good sign.

To understand a company's long term business prospects, we must consider its gross profit margins, which is the ratio of its gross profits to its revenues. A wider gross profit margin indicates that a company may have a competitive advantage, as it is free to keep its product prices high relative to their cost. After looking at its annual reports, we obtained the following information on PBR's margins:

Date Reported Revenue ($) Cost of Revenue ($) Gross Margins (%) YoY Growth (%)
2021-12-31 452,668,000,000.0 233,031,000,000.0 48.52 6.5
2020-12-31 272,069,000,000.0 148,107,000,000.0 45.56 -1.56
2019-12-31 263,827,000,000.0 141,722,000,000.0 46.28 20.99
2018-12-31 310,255,000,000.0 191,568,000,000.0 38.25 n/a
  • Average gross margin: 44.7 %
  • Average gross margin growth rate: 8.6 %
  • Coefficient of variability (higher numbers indicating more instability): 10.0 %

We can see from the above that PBF Energy's gross margins are very strong. Potential investors in the stock will want to determine what factors, if any, could derail this attractive growth story.

To deepen our understanding of the company's finances, we should study the effect of its depreciation and capital expenditures on the company's bottom line. We can see the effect of these additional factors in PBF Energy's free cash flow, which was $168,992,000,000.00 as of its most recent annual report.

This represents the amount of money that is available for reinvesting in the business, or for paying out to investors in the form of a dividend. With its strong cash flows, PBR is in a position to do either -- which can encourage more investors to place their capital in the company. Over the last four years, the company's free cash flow has been growing at a rate of 49.0% and has on average been $101,791,250,000.00.

Another valuation metric for analyzing a stock is its Price to Book (P/B) Ratio, which consists in its share price divided by its book value per share. The book value refers to the present liquidation value of the company, as if it sold all of its assets and paid off all debts). Pbf energy's P/B ratio of 0.2 indicates that the market value of the company is less than the value of its assets -- a potential indicator of an undervalued stock. The average P/B ratio of the Energy sector was 1.45 as of the third quarter of 2022.

Since it has a very low P/E ratio, an exceptionally low P/B ratio, and a pattern of improving cash flows with an upwards trend, PBF Energy is likely undervalued at today's prices. The company has mixed growth indicators because of a negative PEG ratio and consistently strong gross margins that are increasing. We hope you enjoyed this overview of PBR's fundamentals. Be sure to check the numbers for yourself, especially focusing on their trends over the last few years.

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The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.

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