Latin American Recap: Petroleo Brasileiro Petrobras SA (ADR) (PBR) & More

Heavy government intervention means that Petrobras has an attractive valuation. The P/B ratio stands at 0.6, meaning that the stock is trading well below its book value. Considering 2012 EPS of $0.85, the 2012 P/E is 9.7. Forward December 2013 P/E is 7, based on a consensus estimate analysis. On a P/B and P/E basis, valuation is very attractive, and Petrobras is cheap. If the company beats EPS expectations, there could be an important upside.

is a Colombia-based petroleum company focused on identifying opportunities primarily within the eastern Llanos Basin of Colombia, as well as in other areas in Colombia and northern Peru. Ecopetrol S.A. (ADR) (NYSE:EC) has 163 production fields, and production is concentrated in the upper, middle and lower Magdalena, the Eastern Plains and the Caribbean, and the provinces of Putumayo, Cesar and Norte de Santander.

Unlike the two previous stocks, this one is on the short side. Its P/B ratio stands at 2.5, above the industry average of 2.3. Considering 2012 EPS of $4.08, the 2012 P/E is 11.6, but the forward P/E is 4.04, based on a consensus estimate analysis.

Ecopetrol S.A. (ADR) (NYSE:EC) closed Friday’s trading session at $47.25. In the past year, the stock has hit a 52-week low of $45.89 and 52-week high of $67.92. Ecopetrol stock has been showing support around $46.06 and resistance in the $47.94 range. Technical indicators for the stock are also bearish.

Bottom line

These three oil companies have great potential for growth. Of the three, Petrobras is the best positioned to exploit its resources. If this coming first quarter report comes with a positive surprise it could mean a turning point. YPF SA (ADR) (NYSE:YPF) is in need of great funding to exploit the Vaca Muerta fields, and Argentina’s history of default makes it very difficult to attract investors and also very expensive. In the case of Ecopetrol, fundamentals don’t support a buy recommendation.

The article Latin America’s Oil Industry: A Review originally appeared on Fool.com is written by Damian Illia.

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