Gazprom Neft OAO Sponsored ADR (US OTC:GZPFY) March 16, 2015

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GZPFY-US
Implied Price
NEUTRAL
7.27 22.69
A Price as of Close Mar 13 12.71 USD
B CapitalCube Median Implied Price 10.76 USD * CapitalCube Price is over trading range * CapitalCube Price is below trading range
CapitalCube Estimate Range 7.27 - 14.25 USD NA
52 Week Range 9.94 - 22.69 USD
Earnings Momentum Score
 0  100
A Earnings Score (GZPFY) 16.79
B Earnings Score(Peer Median) 16.79
Latest Filing date December 31, 2014
Fundamental Score
 0  100
A Fundamental Score (GZPFY) 38
B Fundamental Score(Peer Median) 59
Dividend Score
 0  100
A Dividend Quality Score (GZPFY) 42
B Dividend Quality Score (Peer Median) 50
Dividend Yield
1.73 8.10
A Dividend Yield (GZPFY) 8.10
B Dividend Yield (Peer Median) 6.62
Analysis
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Fundamental Analysis

Capital Investment Strategy The company's capital investment program suggests it is under-investing in a business that is producing peer median returns.

The company's capital investment program suggests it is under-investing in a business that is producing peer median returns.

Earnings Leverage Compared with its chosen peers, the company's annual revenues and earnings change at a slower rate, implying a lack of strategic focus and/or lack of execution success. Laggard

Laggard: Companies where the yearly Revenue and Earnings Growth are both below peer median, demonstrating both top and bottom line performance that is lagging the peers.
Compared with its chosen peers, the company's annual revenues and earnings change at a slower rate, implying a lack of strategic focus and/or lack of execution success.

Leverage & Liquidity GZPFY-US might have enough interest coverage to take-on additional debt prudently. Some Capacity

Some Capacity: Companies that have some debt capacity based on interest coverage greater than a 2.5x threshold, even though D/EV exceeds a 25 % threshold, suggesting there is some additional borrowing capacity available.
GZPFY-US might have enough interest coverage to take-on additional debt prudently.

Relative Valuation Gazprom Neft OAO Sponsored ADR currently trades at a higher Price/Book ratio (0.64) than its peer median (0.45). P/B above peers

P/B above peers: Price to Book Value is trading above peer median.
Gazprom Neft OAO Sponsored ADR currently trades at a higher Price/Book ratio (0.64) than its peer median (0.45).

Valuation Drivers GZPFY-US's operating performance is relatively good compared to its peers. The market currently does not expect high earnings growth relative to its peers but seems to expect the company to maintain its relatively high rates of return.

GZPFY-US's operating performance is relatively good compared to its peers. The market currently does not expect high earnings growth relative to its peers but seems to expect the company to maintain its relatively high rates of return.

Drivers of Margin The company's median gross margin and relatively low pre-tax margin suggest high operating costs versus peers.

The company's median gross margin and relatively low pre-tax margin suggest high operating costs versus peers.

Growth Expectations While GZPFY-US's revenues growth has been below the peer median in the last few years, the market still gives the stock a PE ratio that is around peer median and seems to see the company as a long-term strategic bet.

While GZPFY-US's revenues growth has been below the peer median in the last few years, the market still gives the stock a PE ratio that is around peer median and seems to see the company as a long-term strategic bet.

Operations Diagnostic GZPFY-US's relative asset efficiency and net profit margins are both around the median level.

GZPFY-US's relative asset efficiency and net profit margins are both around the median level.

Sustainability of Returns GZPFY-US's return on assets currently and over the past five years is around the peer median and suggest that it does not have any particular operational advantages versus peers.

GZPFY-US's return on assets currently and over the past five years is around the peer median and suggest that it does not have any particular operational advantages versus peers.

Likely Corporate Actions

Dividend Action

While GZPFY-US has a moderate cash cushion, its dividend quality is low. In addition, its relative operating performance is not strong enough to suggest an increase in the dividend.

Equity Action

While the company's share price is sufficiently below its 52-week high (currently about 44.02% below) a share buyback may not be justified by fundamentals as that would increase its leverage (debt to market capitalization), which is already higher than the peer median.

M&A Action

GZPFY-US's relatively small size (by book value) suggests that it would be tougher for it to be able to make meaningful acquisitions within this peer group.

Dividend Quality

Dividend Coverage Moderate

The ending cash balance, with a dividend coverage of 1.79x, provides a moderate cushion in case of a significant reduction of cash flows in the future.

Dividend Quality Low Quality

Low Quality: The dividend is referred to as low quality if the operating, investing and issuance cash flows are not sufficient to fund the dividend and require the company to dip into its beginning cash balance. For more information, please refer to the Corporate Actions report.
Over the last twelve months (prior to December 31, 2014), GZPFY-US paid a low quality dividend, which represents a yield of 8.93% at the current price.

Dividend Quality Trend

Dividend quality trend has not been consistent over the last five years. Dividends were paid during each of these years -- of these 1 was high quality, 2 were medium quality and 2 were low quality.

Accounting Red Flags

Accounting Quality

GZPFY-US's net income margin for the last twelve months is around peer median, which combined with a level of accruals that is also around peer median suggests there possibly isn't too much accrual movement flowing into the company's reported earnings.

Management of Reserves

The company's accrual levels over the last twelve months are positive but around the peer median suggesting the company is recording a proper level of reserves relative to its peers.

Material Categories

Excluding the effects of change in revenue, the accounting categories causing the most impact on the movement of net income from the prior period to the current period are PP&E, Inventory and Accounts Receivable.
Characteristics
Key Valuation Items

Price to Book (P/B)

0.64

Price to Earnings (P/E)

3.39

Price to Sales

0.35

Price / EBITDA

1.51

Price to Assets

0.34

Price / FCF

29.57

EV / EBITDA

2.47

EV / FCF

48.20

Dividend Yield

8.10

PEG Ratio

Profitability

Gross Margin

58.03

EBIT Margin

16.47

Net Margin

10.29

FCF Margin

1.18

Operating Margin

16.47

Pre-Tax Margin

11.48

ROE

14.37

ROIC

10.77

ROA

8.57
Efficiency

Debt / Equity

49.87

Debt / Market

83.53

Debt / Book

Debt / EV

48.07

Coverage Ratio

80.32

Interest Coverage

11.10

Cash Days

32.18

Working Cap. Days

55.89

Receivable Days

39.09

Payable Days

15.67

Inventory Days

23.67

Sales / Assets

0.83
Growth

Earnings Growth YOY

-36.23

Revenue Growth YOY

-7.48

Oper. CF Growth YOY

-15.39

EPS Growth YOY

-36.22

FCF Growth YOY

-82.15
Price History

Peers

FA Score

DQ Score

close

52 week range

12.71

9.94

22.69

USD

4.60

3.60

9.08

USD

101.62

98.88

135.10

USD

Company Profile

Gazprom Neft OAO engages in the exploration, production, and sale of crude oil and gas. Its activities also include production of refined petroleum products, and distribution and marketing operations through its retail outlets. It operates through the Upstream and Downstream segments. The Upstream segment explores, develops and produces crude oil and natural gas, and provides oilfield services. The Downstream segment processes, purchases, sells, and transports crude and refined petroleum products. The company was founded on August 24, 1995 and is headquartered in St. Petersburg, Russia.

Closing Stock Price

USD 12.705

As of Date

March 13, 2015

One Year Performance

-31.5057%

One Month Performance

-15.7493%

Industry Group

Integrated Oil

52 wk. Range

USD 9.938 - USD 22.694

Market Cap (Millions)

USD 11988.4

Total Shares Outstanding

943.6
Latest Filing Dates

Annual

December 31, 2014

Semi Annual

N/A

Quarterly

December 31, 2014

Next Release Date

May 14, 2015

Filing Currency

USD

Listed Exchange

US OTC
Peers


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Closing Stock Price

USD 12.705

As of Date

March 13, 2015

One Year Performance

-31.51%

One Month Performance

-15.75%

Industry Group

Integrated Oil

52 wk. Range

USD 9.938 - USD 22.694

Market Cap (Millions)

USD 11,988.4

Total Shares Outstanding (Millions)

943.60
Latest Filing Dates

Annual

December 31, 2014

Semi Annual

N/A

Quarterly

December 31, 2014

Next Release Date

May 14, 2015

Filing Currency

USD

Listed Exchange

US OTC
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