Why The United States Has Outperformed Europe
It's fair to say that US international oil companies have not had a good year so far. Year to date, Chevron and ExxonMobil have only risen 9% and 1% respectively compared to the S&P 500, which has gained 19%.
On the other hand, European international oil companies, such as France's Total SA , Norway's Statoil and Italy's Eni SpA have had an even worse year so far, with all but Total notching negative year-to-date returns. This got me thinking: with such a poor performance so far this year, do European oil companies now look more attractive than their respective US counterparts?
To start the comparison, I'm going to look at these companies using an EV/reserves calculation. Companies that have a low per-barrel valuation in relation to their peers are undervalued in the context.
Reserves (Billion BOE)
Reserves equal oil equivalent barrels. Reserve values taken at year end 2012. Figures in billions and where applicable $US. Data from Yahoo! Finance
Valuations are never the whole story, and a company's history of growth is usually more telling than a single valuation at a single point in time. So, has Eni earned its low valuation by chalking up a poor history of earnings, revenue, and equity growth?
Performance figures are based on the figures reported by each company from the end of fiscal 2009, to the trailing-12-month figures based on the last four quarters of data.
Shareholder equity growth
Share price growth
Share in issue
All in all, these results are slightly confusing. Having said that, there is a clear trend, excluding their higher than average price/earnings ratios, European oil majors do look cheaper than their US counterparts, but they are also less efficient. The standout firm here is Statoil, which has boosted earnings 100% during the last four years while expanding shareholder equity by 66% and trading at the lowest price/book and price/sales ratios in the group. Statoil also offers investors a nice dividend yield of 5.1% at current levels.
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The article Why The United States Has Outperformed Europe originally appeared on Fool.com.Fool contributor Rupert Hargreaves has no position in any stocks mentioned. The Motley Fool recommends Chevron, Statoil (ADR), and Total SA. (ADR). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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