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LukoilBP Comparison - Case Study Example

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LukoilBP Comparison

Nonetheless, its performance in boosting its market value has been described as hyper in nature as evidenced by the graph below:
This ratio is the company's share price at year end divided by basic income per share. Basic earnings per ordinary share amounts are calculated by dividing the profit for the year attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year. The average number of shares outstanding excludes treasury shares and the shares held by the employee share ownership plans. The following tables detail BP and OAO LUKOIL share price, basic income per share and the price to earnings ratio:
BP, having wider operations than LUKOIL, registers a higher P/E ratio. However, computing for the rate of change of the P/E, it is found that LUKOIL is registering much higher growth than BP. The results are shown below:
With this information, it can be seen that LUKOIL registers double digits for the P/E ratio. This growth essentially tells the investor that LUKOIL is outperforming BP. Although the investor can expect higher returns for BP, this may not be the case in the future as LUKOIL's P/E growth rate is double that of BP.
Basically, the P/E ratio is expected to increase as Basic Earning Per Share are also up with share price also expected to increase because of the good performance of LUKOIL. ...
Sample Computation: ( LUKOIL 2005)
P/E = Share Price / Basic Earnings Per Share
= 59.40 / 7.91 = 7.51

BP, having wider operations than LUKOIL, registers a higher P/E ratio. However, computing for the rate of change of the P/E, it is found that LUKOIL is registering much higher growth than BP. The results are shown below:

Table 4. Rate of Change Profile

P/E Rate of Change (%) 2003-2004 2004-2005
LUKOIL 13.62 28.60__
BP 6.07 12.36__

The computation for the rate of change was carried on using the following equation:

Rate of Change = ( P/E for Year End - P/E for the Previous Year End) * 100%
P/E for the Previous Year End

With this information, it can be seen that LUKOIL registers double digits for the P/E ratio. This growth essentially tells the investor that LUKOIL is outperforming BP. Although the investor can expect higher returns for BP, this may not be the case in the future as LUKOIL's P/E growth rate is double that of BP.

Forecast
The most recent available projection for LUKOIL is a 9M 2006 projections and is conveniently compared to 9M 2005. It is shown below:

Table 5. Financial Forecast











Source: 2006 Financial Results from www.lukoil.ru/ investorcenter
Basically, the P/E ratio is expected to increase as Basic Earning Per Share are also up with share price also expected to increase because of the good performance of LUKOIL. The company is currently very aggressive in entering and capturing a major portion of the US market. It has already purchased rights to Getty and its oil distribution facilities in the US. With regards to BP, the P/E ratio is forecasted to increase as well ...Show more

Summary

In this section, the current market value for LUKOIL will be derived/computed using 60% of the share capital of the ADR. This will then be compared to the current market value of BP. Note that the word "current" is taken to denote the time indicated by the data.
Author : dnicolas
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