Monday 14 April 2014

Analysis of Neste Oil

A Finnish oil and refinery company

Company: Neste Oil

Business: A Finnish oil and refinery company. They have two business segments: Oil Products & Renewable (procures crude oil, produce classical products such as lubricants as well as renewable diesel) and the second segment is Oil Retail (fuel stations, biggest in Finland and have a market cut also in the Baltics and parts of Russia)

Active: Mainly around the Baltic Sea with Finland, the Baltics, Sweden but are also present in the Netherlands, in the US and in the Middle East.

P/E: 7.3

contrarian values of P/E, P/B, ROE as well as dividend

The P/E of Neste Oil is excellent with 7.3 and the P/B is also fairly ok with 1.3 which means that Graham would have liked this company. The earnings to sales are not very high with only 3% but the ROE is very good with almost 18%. The book to debt ratio is ok with 0.7. In the last five years they have had an excellent growth of 12.6% which gives us a motivated P/E around 25 to 33 which means that they are today highly undervalued on the market like all oil companies today since people are worried what they will be doing in the future to get revenue. They pay a very nice dividend of 4.4% which represents 32% of their earnings so they should be able to keep it up.

Conclusion: Both Graham and I like this company. They pay a nice dividend, they have a nice ROE, a great P/E and the P/B is acceptable. I could very much consider to step into this company today as a shareholder and will therefore add it to my Stocks of Interest list with the next update.

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