At HousewifeTrading, we decided to buy Gazprom PAO. Why would we? Russia is under political sanction and oil prices are dramatically low – even if increasing slowly last couple of months.
All ratios are good – Except current ratio
Looking at many companies from the same industry in Russia, but also comparing Gazprom PAO to monsters like Exxon Mobil Corporation, the financial ratios of Gazprom PAO are really solid.
With the 2nd biggest market cap between similar companies in Russia, Gazprom PAO is the company with the lowest P/E ratio. Which is in general an indicator that the stock is undervalued. The price-to-book ratio is very low as well. Approx 0.27, it means that the markets values Gazprom PAO 73% below the value of its audited assets. In case of a bankruptcy the assets will be sold for an higher price than market cap and shareholders should be repaid according to their investment. In terms of dividends, the Gas and Oil company is at the highest end of the spectrum with a dividend yield of 6.08%. Gazprom PAO has a healthy current ratio of 1.6, meaning that for each USD of debt, Gazprom PAO has 1.6 USD of asset.
But the most important of all, is the profit. It’s a financially very profitable company with 16.3% of net profit margin, which is slightly higher than Exxon, and much better than BP Plc or Royal Dutch Shell Plc. Other companies like Total SA for example also offer solid net profit margin, but for a much more expensive P/E ratio of 17.
Gazprom PAO, positioning itself strongly with China
After the difficulties Gazprom is facing when dealing with Europe based on the Russian sanctions, Gazprom is focusing on dealing with countries that want to work with Russia. China is one of them.
Operating beyond Russia
Not only operating in Russia or China, Gazprom is making sure to position itself abroad. Deals with India, with Bolivia signed at the GECF, with Iran as part of a visit of Vladimir Putin in Teheran, with Pakistan in Islamabad. And those are only the deals we know about.
No growth but at least maintaining revenue
As we can see from Gazprom PAO results, Gazprom secures stability in revenue together with strong profitability. That’s good especially undergoing so much difficulties within the sector and within the Russian sanctions.
Gazprom holds the worlds biggest Natural Gas reserves and its growing
Gazprom holds 17% of the global gas resources and 72% of the Russian gas resources. As an own statement, Gazprom PAO : “In order to replenish its resource base, the Gazprom Group carries out geological exploration in Russia and abroad, as well as continuously monitors new projects and assets eligible for purchase”.
It’s low at the moment
While all the monster stocks are at the top of their market cap in US. Gazprom PAO is at the moment at one of its lowest available price.
All in all, we bought Gazprom PAO mid of November 2017. We agree it’s a risky buy, but the financial ratios are strong and the company is profitable. There were couple of cases of executive having trouble with justice but we would not take it as a deal breaker.
Please only consider this investment if you can afford to lose it.
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