When a firm has strong profitability ratios, it portrays to an investor that it provides a good return on his or her investment. The profitability numbers that I came across for Royal Dutch Shell weren't the best. Keep in mind, however, that this is just one of the many ways to analyze a stock.
Royal Dutch Shell's dividend yield is roughly double that of industry giants Exxon Mobil Corporation (XOM) and Chevron Corporation (CVX). But the trouble that Shell is having is finding new reserves. Shell's proved reserves were 13.6B barrels of oil equivalent in 2012, down from 14.25B in 2011.
The declining operating profit margin is rather concerning and energy investors will most likely prefer Chevron or Exxon as they have stronger numbers in this regard.
The net profit margin has also stayed below the industry average in the last five years.
The Return on Investment ratios are also not as impressive as the rest of the industry, but Shell's closest rivals like BP Plc (BP) and TOTAL S.A. (TOT) have similar values. I must mention here that Chevron and Exxon are far ahead in this avenue too.
The Return on Equity [ROE] ratio is arrived at by dividing the net income by the shareholders' equity. The ROE has gone up from 2010 to 2011, but then declined from 2011 to 2012. All the major integrated oil companies have not been able to replicate the impressive 2008 levels.
In the short to mid-term horizon, Shell is a short idea.
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Royal Dutch Shell: A Short Idea
Published 04/03/2013, 03:30 PM
Updated 07/09/2023, 06:32 AM
Royal Dutch Shell: A Short Idea
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