China Mobile Ltd. (CHL), Petroleo Brasileiro Petrobras SA (PBR) & Some EM Opportunities

In terms of valuation, Vivo currently trades at a significant discount in relation to its competitors. The company currently trades at 14.2 times trailing twelve month’s earnings, 1.3 times price/book, and 0.6 times price/sales, all of which are below the industry average. In terms of cash flow, Vivo is once again ahead of its peers. The company currently has a free cash flow yield of 15% and trades at just 7.5 times cash flow per share. Vivo is also about 10% off of its 52-week high and is priced well for entry.

As with most telecoms, Vivo pays a hefty dividend of $1.54 per share, which yields just under 6%. Also, with a payout ratio of 48%, the current dividend is not going to be threatened by short-term revenue/profit fluctuations.

Our last emerging market opportunity comes from the Brazilian state-run oil giant Petroleo Brasileiro Petrobras SA (NYSE:PBR). The most attractive part of Petroleo Brasileiro Petrobras SA (NYSE:PBR) is its valuation. The company currently trades at just 6.8 times 2013 earnings with a price/book ratio of 0.8, both below the industry average. Petroleo Brasileiro Petrobras SA (NYSE:PBR) is also nearly 30% off of its 52-week high and looks like it has hit the floor, and is now starting to rebound.

Petroleo Brasileiro Petrobras SA (NYSE:PBR)’ Q1 2013 results were very promising, as the company reported a profit of 7.69 billion reais above forecasts for 6.7 billion, and was subsequently upgraded to Buy from Neutral by Merrill Lynch. One area where I would very much like to see improvement from Petroleo Brasileiro Petrobras SA (NYSE:PBR) is in dividend payments. The company currently yields just 0.67%, which is significantly less than other oil production companies of similar size.

Wrap up

Emerging markets need to be on the forefront of anyone’s mind who is trying to develop a modern day diversified portfolio. Companies from countries like China, India, and Brazil present great growth opportunities as well as much needed international exposure. It is important, however, when evaluating these companies that you do your due diligence as most companies from emerging markets should be considered speculative in nature.

The three companies above should give you a great idea as to the industries and countries you should be searching for when evaluating companies from emerging markets for your portfolio.

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