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Rating Change Detail - PETROLEO BRASILEIRO PETROBRAS SA (ADR) (PBR) - 2/22/2013
The stock was upgraded from No Interest to Some Interest on 2/22/2013 by the Contrarian Investor Strategy based on the principles of David Dreman. The score according to this strategy rose from 57% to 76%. A full detailed analysis of PBR using this strategy is included below. For a full detailed analysis of PBR using 12 proven strategies of Wall Street Legends, take a free trial to Validea.com

Detailed Analysis of PETROLEO BRASILEIRO PETROBRAS SA (ADR) (PBR)

Strategy: Contrarian Investor - Based on: David Dreman

MARKET CAP: [PASS]

Medium to large-sized companies (the largest 1500 companies) should be chosen, because they are more in the public eye. Furthermore, the investor is exposed to less risk of "accounting gimmickry", and companies of this size have more staying power. PBR has a market cap of $107,063 million, therefore passing the test.

EARNINGS TREND: [PASS]

A company should show a rising trend in the reported earnings for the most recent quarters. PBR's EPS for the past 2 quarters, (from earliest to most recent quarter) 0.21, 0.42 have been increasing, and therefore the company passes this test.

EPS GROWTH RATE IN THE IMMEDIATE PAST AND FUTURE: [FAIL]

This methodology likes to see companies with an EPS growth rate higher than the S&P in the immediate past and a likelihood that this trend will continue in the near future. Unfortunately, we do not have sufficient data available on PBR at this time.

This methodology would utilize four separate criteria to determine if PBR is a contrarian stock. In order to eliminate weak companies we have stipulated that the stock should pass at least two of the following four major criteria in order to receive "Some Interest".

P/E RATIO: [FAIL]

The P/E of a company should be in the bottom 20% of the overall market. PBR's P/E of 9.95, based on trailing 12 month earnings, is higher than the bottom 20% criterion (below 9.27), and therefore fails this test.

PRICE/CASH FLOW (P/CF) RATIO: [FAIL]

The P/CF of a company should be in the bottom 20% of the overall market. PBR's P/CF of 4.96 does not meet the bottom 20% criterion (below 4.91), and therefore fails this test.

PRICE/BOOK (P/B) VALUE: [PASS]

The P/B value of a company should be in the bottom 20% of the overall market. PBR's P/B is currently 0.59, which meets the bottom 20% criterion (below 0.77), and it therefore passes this test.

PRICE/DIVIDEND (P/D) RATIO: [PASS]

The P/D ratio for a company should be in the bottom 20% of the overall market (that is the yield should be in the top 20%). PBR's P/D of 15.24 meets the bottom 20% criterion (below 19.84 or yield above 3.7% ), and it therefore passes this test.

This methodology maintains that investors should look for as many healthy financial ratios as possible to ascertain the financial strength of the company. These criteria are detailed below.

CURRENT RATIO: [PASS]

A prospective company must have a strong Current Ratio (greater than or equal to the average of it's industry [1.40] or greater than 2). This is one identifier of financially strong companies, according to this methodology. PBR's current ratio of 1.96 passes the test.

PAYOUT RATIO: [FAIL]

A good indicator that a company has the ability to raise its dividend is a low payout ratio. The payout ratio for PBR is 68.53%, while its historical payout ratio has been 30.55%. Therefore, it fails the payout criterion.

RETURN ON EQUITY: [FAIL]

The company should have a high ROE, as this helps to ensure that there are no structural flaws in the company. This methodology feels that the ROE should be greater than the top one third of ROE from among the top 1500 largest cap stocks, which is 16.68%, and would consider anything over 27% to be staggering. The ROE for PBR of 6.79% is not high enough to pass this criterion.

PRE-TAX PROFIT MARGINS: [PASS]

This methodology looks for pre-tax profit margins of at least 8%, and considers anything over 22% to be phenomenal. PBR's pre-tax profit margin is 10.16%, thus passing this criterion.

YIELD: [PASS]

The company in question should have a yield that is high and that can be maintained or increased. PBR's current yield is 6.56%, while the market yield is 2.74%. PBR passes this test.

LOOK AT THE TOTAL DEBT/EQUITY: [FAIL]

The company must have a low Debt/Equity ratio, which indicates a strong balance sheet. The Debt/Equity ratio should not be greater than 20%. PBR's Total Debt/Equity of 54.48% is not acceptable.

For a full detailed analysis of PBR using 12 proven strategies of Wall Street Legends,
take a free trial to Validea.com

Rating Change Detail - PETROLEO BRASILEIRO PETROBRAS SA (ADR) (PBR) - 2/22/2013

Detailed Analysis of PETROLEO BRASILEIRO PETROBRAS SA (ADR) (PBR)

Strategy: Contrarian Investor - Based on: David Dreman