Will Petroleo (NYSE:PBR) stakeholders stop to drop in July?

The stock is undervalued compared to its sector. As many millenniums are trying to avoid energy space, it makes sense to sum up Petroleo Brasileiro SA a little further and try to understand its current market patterns. We will analyze why Petroleo Brasileiro investors may still consider a stake in the business.
Published over a year ago
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Reviewed by Michael Smolkin

The company has 327.82 B in debt with debt to equity (D/E) ratio of 0.84, which is OK given its current industry classification. Petroleo Brasileiro has a current ratio of 1.23, demonstrating that it may have difficulties to pay its financial commitments when the payables are due. Debt can assist Petroleo Brasileiro until it has trouble settling it off, either with new capital or with free cash flow. So, Petroleo Brasileiro's shareholders could walk away with nothing if the company can't fulfill its legal obligations to repay debt. However, a more frequent occurrence is when companies like Petroleo Brasileiro sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Petroleo to invest in growth at high rates of return. When we think about Petroleo Brasileiro's use of debt, we should always consider it together with cash and equity.
Petroleo Brasileiro financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures the total debt position of Petroleo Brasileiro, including all of Petroleo Brasileiro's outstanding debt obligations, and compares it with the equity. In simple terms, the high financial leverage means the cost of production, together with running the business day-to-day, is high, whereas, lower financial leverage implies lower fixed cost investment in the business and generally considered by investors to be a good sign. So if creditors own a majority of Petroleo Brasileiro assets, the company is considered highly leveraged. Understanding the composition and structure of overall Petroleo Brasileiro debt and outstanding corporate bonds gives a good idea of how risky the capital structure of a business is and if it is worth investing in it. Please read more on our technical analysis page.

Understanding Petroleo Total Liabilities

Petroleo Brasileiro liabilities are broken down into two parts on the balance sheet. These are short-term (or current) obligations and long-term debt. Petroleo Brasileiro has to fulfill its short-term liabilities in this reporting year and should be no more than 12 months old. Long-term debt, on the other hand, is anything beyond the 12-month payment timeframe. Common short-term liabilities found on Petroleo Brasileiro balance sheet include debt obligations and money owed to different Petroleo Brasileiro vendors, workers, and loan providers. Below is the chart of Petroleo short long-term liabilities accounts currently reported on its balance sheet.
You can use Petroleo Brasileiro Petrobras financial leverage analysis tool to get a better grip on understanding its financial position

How important is Petroleo Brasileiro's Liquidity

Petroleo Brasileiro financial leverage refers to using borrowed capital as a funding source to finance Petroleo Brasileiro Petrobras ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Petroleo Brasileiro financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Financial leverage can amplify the potential profits to Petroleo Brasileiro's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of Petroleo Brasileiro's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets). Please check the breakdown between Petroleo Brasileiro's total debt and its cash.

Breaking down Petroleo Brasileiro Further

The latest bullish price patterns experienced by current Petroleo Brasileiro shareholders may encourage retail investors to take a closer look at the company as it is trading at a share price of 13.21 on 34,411,300 in trading volume. The company management teams have been very successful in rebalancing the company assets at opportune times to take advantage of market volatility in May. The stock standard deviation of daily returns for 90 days investing horizon is currently 2.58. The current volatility is consistent with the ongoing market swings in May 2022 as well as with Petroleo Brasileiro unsystematic, company-specific events.

Will Petroleo price fall impact its balance sheet?

The semi variance is down to 6.78 as of today. Petroleo Brasileiro SA currently demonstrates below-average downside deviation. It has Information Ratio of 0.12 and Jensen Alpha of 0.28. However, we advise investors to further question Petroleo Brasileiro SA expected returns to ensure all indicators are consistent with the current outlook about its relatively low value at risk. Understanding different market volatility trends often help investors to time the market. Properly using volatility indicators enable traders to measure Petroleo Brasileiro's stock risk against market volatility during both bullying and bearish trends. The higher level of volatility that comes with bear markets can directly impact Petroleo Brasileiro's stock price while adding stress to investors as they watch their shares' value plummet. This usually forces investors to rebalance their portfolios by buying different stocks as prices fall.

Petroleo Brasileiro Implied Volatility

Petroleo Brasileiro's implied volatility exposes the market's sentiment of Petroleo Brasileiro SA stock's possible movements over time. However, it does not forecast the overall direction of its price. In a nutshell, if Petroleo Brasileiro's implied volatility is high, the market thinks the stock has potential for high price swings in either direction. On the other hand, the low implied volatility suggests that Petroleo Brasileiro stock will not fluctuate a lot when Petroleo Brasileiro's options are near their expiration.

Our Final Take On Petroleo Brasileiro

While other entities within the oil & gas integrated industry are still a little expensive, even after the recent corrections, Petroleo Brasileiro may offer a potential longer-term growth to retail investors. While some retail investors may not share our view, we believe that right now is not a good time to increase your holdings in Petroleo. Please use our equity advice module to run different scenarios to ensure your current risk level and investment horizon are fully reflective of your current investing preferences in regards to Petroleo Brasileiro.

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Editorial Staff

This story should be regarded as informational only and should not be considered a solicitation to sell or buy any financial products. Macroaxis does not express any opinion as to the present or future value of any investments referred to in this post. This post may not be reproduced without the consent of Macroaxis LLC. Macroaxis LLC and Ellen Johnson do not own shares of Petroleo Brasileiro Petrobras. Please refer to our Terms of Use for any information regarding our disclosure principles.

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