Thursday 11 July 2013

Analysis of Royal Dutch Shell

Dutch oil and gas company

Company: Royal Dutch Shell

Business: This Dutch oil company is divided into three units: Upstream explores for and extracts crude oil and natural gas, Downstream refines, supplies, trades and ships crude worldwide, manufactures and markets a range of products, and produces petrochemicals for industrial customers and finally they have Projects & Technology manages delivery of Shell’s major projects and drives the research and innovation to create technology solutions.

Active: They are active in over 70 countries world wide. As a small comment I know people that are working for Shell and I´ve never heard a bad word from them. It is a company that very early on started to take very good care of their employees and that is not based on salary but based on work / spare time ratio. A burned out employees simply costs far more then sending that person off for a week on vacation.

P/E: 7.5

containing P/E and P/B values as well as dividend

The P/E of Shell is very low at 7.5 and the P/B is also looking great with 1.05. this means according to Graham a very, very clear buy! the earnings to sales are 6% which is double what BP is bringing out. The book do debt is excellent with 111%. The growth in the large 5 years has been very low only 1% per year. Part of the reason for this seems to be that 2008 was an excellent year and then in 2009 it dropped down to 280 billion $ in revenue so since then they have had excellent growth. Based on the 2008 growth the motivated P/E then becomes around 10. The make some good R&D work and spend 16.6% of their earnings into R&D and they need R&D to be able to extract oil & gas better and deeper and faster and safer not to forget. They pay a very nice dividend of 5.5% which represents 41% of their earnings so it is fully acceptable.

Conclusion: If one does not have ethical reasons then Shell is a good company to buy today. The stock is cheap, they have good solid earnings & they pay a nice dividend.

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