France might be in the thick of the eurozone fight for survival, but the nation's troubles don't mean investors can't profit from its best and strongest companies. French supermajor oil corporation Total SA
Highs and lows around the globe
Total underperformed the market for most of 2012's first half, dropping into the $40 price range on three consecutive quarterly earnings misses. A gas leak at the company's Elgin wellhead platform in the North Sea cost the company a further $7.5 billion.
Woes have continued stockpiling for Total. Iraq's oil ministry threatened the company with cutting all contracts after a deal in the nation's northern Kurdish region. Given that Iraqi oil fields currently produce more than 3 million barrels daily and aim for future production levels of 11 million barrels per day, Total faces a sticky situation in the Fertile Crescent.
Potential shareholders would be wise to keep an eye on the company's dealings in Iraq and the region as a whole -- particularly with sociopolitical unrest still raging since last year's Arab Spring. The company holds the majority of its reserves in the two regions, making ongoing political instability a threat, particularly considering Iranian threats around the Strait of Hormuz -- a locale that oversees 17 million barrels of oil per day. Any military action in that politically valuable chokehold could seriously damage oil exports from the Middle East.
Still, Total's considerable exposure in high-output regions such as these should have investors optimistic about the future. The company recently took on operatorship of a Brazilian offshore drilling block, setting up a promising first step to increasing the company's presence in the Western Hemisphere.
Of course, rising oil prices -- Brent spot prices currently sit at $114.48 per barrel after bottoming out below $90 -- would certainly boost the company's financials.
Something for every investor
Total's financials won't blow away Wall Street, but they do stack up well with other Big Oil rivals.
|
Company |
P/E |
Net Margin |
Return on Equity |
Dividend Yield |
|---|---|---|---|---|
| Total SA | 8.3 | 6.2% | 16.2% | 4.9% |
|
BP |
7.8 | 4.6% | 15.9% | 4.5% |
|
Chevron |
8.4 | 11.6% | 21.6% | 2.9% |
|
ExxonMobil |
9.3 | 10.4% | 29% | 2.6% |
Powerhouse industry titans Exxon and Chevron lead in fundamentals such as profitability, but value-oriented and income investors alike could find a gem in Total's stock. The company has grown its dividend at a five-year rate of 4%, with plenty of room to keep growing through a respectable 41% dividend payout ratio. Even though income investors should already be pleased with Total's nearly 5% yield, the company boasts room to grow as well.
Total sports a forward P/E of just under 6.8, far below the rate of competitors, such as Exxon's 11.1 ratio. While that should make value investors smile, the stock's short interest inexplicably jumped almost 143% recently. Potential shareholders could see a nice gain while the rest of the market turns its back on this promising stock.
Wall Street may irrationally abhor Total right now, but that's one of the best times for you to pick up a piece of this oil behemoth. Oil has risen consistently as of late and shows no sign of slowing down, a great trend for Total shareholders. Although the stock has recovered somewhat from its 52-week lows, now's still a great time for investors to get a piece of the action. I'm confident enough in this industry titan's strengths that I'm putting in an outperform call on CAPS.
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