Investors love stocks that consistently beat the Street without getting ahead of their fundamentals and risking a meltdown. The best stocks offer sustainable market-beating gains, with robust and improving financial metrics that support strong price growth. Does Petrobras Argentina SA ADR (NYSE:PZE) fit the bill? Let’s take a look at what its recent results tell us about its potential for future gains.
What we’re looking for
The graphs you’re about to see tell Petrobras Argentina SA ADR (NYSE:PZE)’s story, and we’ll be grading the quality of that story in several ways:
- Growth: are profits, margins, and free cash flow all increasing?
- Valuation: is share price growing in line with earnings per share?
- Opportunities: is return on equity increasing while debt to equity declines?
- Dividends: are dividends consistently growing in a sustainable way?
What the numbers tell you
Now, let’s take a look at Petrobras Argentina SA ADR (NYSE:PZE)’s key statistics:
PBR Total Return Price data by YCharts
| Passing Criteria | 3-Year* Change | Grade |
|---|---|---|
| Revenue growth > 30% | 37.4% | Pass |
| Improving profit margin | (41.5%) | Fail |
| Free cash flow growth > Net income growth | 210.7% vs. (19.6%) | Pass |
| Improving EPS | (45.7%) | Fail |
| Stock growth (+ 15%) < EPS growth | (54.5%) vs. (45.7%) | Pass |
Source: YCharts. * Period begins at end of Q2 2010.
PBR Return on Equity data by YCharts
| Passing Criteria | 3-Year* Change | Grade |
|---|---|---|
| Improving return on equity | (71.2%) | Fail |
| Declining debt to equity | 11.4% | Fail |
| Dividend growth > 25% | (30%) | Fail |
| Free cash flow payout ratio < 50% | 11.1% | Pass |
Source: YCharts. * Period begins at end of Q2 2010.
How we got here and where we’re going
Petrobras Argentina SA ADR (NYSE:PZE) earns a middling four out of nine passing grades, and one of those passing grades was essentially a technicality — Petrobras’ EPS have declined less than its share price. Despite promising revenue growth over the past three years, Petrobras Argentina SA ADR (NYSE:PZE)’s margins have collapsed due to high operational expenses, the effects of which have been compounded by share dilution. Will Petrobras Argentina SA ADR (NYSE:PZE) be able to turn these weaknesses around and rebound, or is it just drilling a dry hole for investors? Let’s dig a little deeper to see what the future may hold.
