Is Royal Dutch Shell A Stock That Investors Need To Look At?

  • Feb 06, 2019 GMT
  • Team Kalkine
Is Royal Dutch Shell A Stock That Investors Need To Look At?

Royal Dutch Shell plc (Shell or 'the company') explores for and recovers crude oil, natural gas, and natural gas liquids, transports oil and gas; and operates the upstream and midstream infrastructure necessary to deliver oil and gas to market. The company is also engaged in refining and marketing activities for oil products and chemicals as well as gas power. The company offers petroleum products supply and distribution services; gas service stations; and automotive technical support services. Shell sells its products and services under the brands: Shell and V- Power. Shell operates through four segments namely: Downstream; Integrated Gas; Upstream and Corporate. Shell operates in Europe, Asia, Oceania, Africa, and the Americas. It is headquartered in The Hague, Netherlands.

On 31st Jan, company has reported revenue of $388.4bn for the financial year ended December 2018 (FY18), an increase of 27.3% from over FY2017.  Shell reported pre-tax profit of $35.6 bn, reflecting an increase of 96.5% over FY17 pre-tax profit.

The board of Royal Dutch Shell Plc (RDSA.L) announced on 31st January’19, an interim dividend of $0.47 per ordinary shares. Record date for dividend distribution is 15th Feb’19.

Looking at key fundamentals, the return on equity for the group has been on a higher side compared to industry median while key margins are yet to be closer to or surpass the industry medians.

Ratios- Key Metrics  Ratios

Segment Contribution

In 2017, company earned 88.14% of total revenue from downstream segment, 13.7% of total revenue from upstream segment and 12.01% from Integrated gas business. Geographically, the company reported revenue from Asia, Oceania and Africa that accounted for 37.58%, Europe contributed 32.97% to the top line, USA accounted for 22% and 7.55% from ROW was noted. This distribution was more or less maintained in 2018.

SWOT Analysis

SWOTStock Performance

At the time of writing, the stock was trading at GBp 2,442.5, edging slightly down as at February 06, 2019 (post mid-day trading). 52 Week high / low of the stock is GBP 2755/ GBp 2168. Further, 1-year return for the stock is has been about 6.85% post the latest result.

Under the Valuation Metrics, EV/EBITDA of 6.5 (LTM) has been better than energy sector average while price to book value is above 1 as the industry average. The dividend yield of about 6% is quite close to the sector average. In terms of peer analysis also, the stock has been competing well with BP Plc, Equinor ASA etc., when it comes to net profit margin and Enterprise Value to EBITDA.

Thus, Royal Dutch Shell has decent fundamentals and is under investors’ radar given the developments at hand.

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