Petroleo Brasileiro Petrobras SA (ADR) (PBR): A Profitable Long Term Investment

ConocoPhillips is a global integrated company with assets in North America, Asia, Europe and Australia. It is not concentrated in one country like Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR). The P/E ratio of ConocoPhillips (NYSE:COP) is around 11, which is almost equal to the industry average. It is an energy company with a fairly high yield, and might be a safe pick for income investors. If I look at the stock price of the two companies over the past 3 months, ConocoPhillips (NYSE:COP) has performed better than Petrobras and closer to the benchmark S&P 500 index.

TOTAL S.A. (ADR) (NYSE:TOT) is a France-based integrated oil and gas company with a low forward P/E. It offers steady income and has a lower volatility with an attractive dividend yield of 5.70%. The growth opportunities are minimal for Total. It is looking forward to grow its future hydrocarbon production but does not have any significant investment plans like Petrobras. So I would rate Petrobras ahead of Total for a growth investor.

The bottom line

Petrobras is one of the top 3 most valued brands in Brazil. The stock looks cheap, trading around 7 times its 2013 forecast earnings. Recent domestic fuel price increases bring a sigh of relief for Petrobras. The weakness in international crude and fuel prices combined with a stronger domestic currency are helping Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) to narrow its losses. If the company can efficiently execute its plans and step up production, it will bring them significant dollars of revenue. This will in turn reduce the levels of debt on its balance sheet. The future investments will surely generate a lot of returns. For all these reasons I believe the company has a lot of potential which makes the stock a profitable long term investment.

The article Petrobras: A Profitable Long Term Investment originally appeared on Fool.com and is written by Sujata Dutta.

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