Petroleo Brasileiro Petrobras (NYSE:PBR) discovered new oil well- will the ratings improve?

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By Mark Michaels on August 18, 2014 Company, Energy & Solar

On the last trading day, August 15, 2014, the stocks of Petroleo Brasileiro Petrobras (NYSE:PBR) went up when the company disclosed that it has discovered another oil well in the Santos Basin.

Petroleo Brasileiro Petrobras (NYSE:PBR) made this discovery near its well 3: the new well is approximately 296 km away from the region of Rio de Janeiro (offshore)

Moreover, the ratings team of TheStreet gave the stocks of Petroleo Brasileiro Petrobras (NYSE:PBR) a rating of ‘hold’ with a score of C. When asked about their ratings, the team said that Petroleo Brasileiro Petrobras (NYSE:PBR) had a number of strengths but those strengths were balanced by some of its weaknesses, and thus, the stock could move towards either direction.

Talking about the strengths of the company, the ratings team said that Petroleo Brasileiro Petrobras (NYSE:PBR) has a firm financial position in the market together with remarkable valuation and impressive stock performance. The company also has affordable level of debts.

However, the team also mentioned some of the weaknesses of Petroleo Brasileiro Petrobras (NYSE:PBR). The company has a declining net income, not-so-good profit margins and a bad cash flow for operations.

Some other Highlights from the Report:

The stocks of the company are not only running high but they also remained successful in surpassing the Standard and Poor’s 500 figures, despite its low earnings. Although the stocks of the company rose during the past fiscal year; currently, there is no such evidence that justifies the purchase of more of Petroleo Brasileiro Petrobras’s (NYSE:PBR) stocks.
During the most recent quarter, the earnings decreased by 43.3 percent when compared with the figures of the same quarter a year back. The company has reported stable EPS over the past year, which means that the management of the company is strong. The analysts are of the view that the earnings will increase further in the coming quarters. Last year, Petroleo Brasileiro Petrobras (NYSE:PBR) reported an EPS of $1.70; however, this year, market expects the earnings to go up to 3.81.
Coming to the gross profit margin of the company, Petroleo Brasileiro Petrobras (NYSE:PBR) currently has quite low margins; the figures are at 32.19 percent. The numbers are quite low when compared with the figures of the same quarter a year back. The net profit margin of the company is also behind the industry average. The figures are at 6.60 percent right now.
Cash flow for operations has also declined considerably. The numbers decreased by 46.59 percent and came down to $3,981 million. Similarly, Petroleo Brasileiro Petrobras’s (NYSE:PBR) growth in cash generation is also quite low.

Coming to the stock prices of Petroleo Brasileiro Petrobras (NYSE:PBR), the company, on the last trade day, August 15, 2014, opened its stocks at a price of $15.86 and closed at an increased price of $16.55. The company has a market capitalization of $111.8 billion with a price to earnings ratio of 11.31. As far as the dividend yield of the company is concerned, the numbers are reported to be around 4.50 percent.