Total (TOT, Financial) is an integrated oil and gas company. It explores and develops oil and gas properties, liquefied natural gas, petrochemicals and specialty chemicals. It is also engaged in trading and shipping of crude oil and petroleum products.Â
Total is engaged in every sector of the oil industry, including upstream (hydrocarbon exploration, development and production) and downstream (refining, petrochemicals, specialty chemicals, trading and shipping of crude oil and petroleum products and marketing). It also operates in the renewable energies and power generation sectors, where its projects power hundreds of thousands of households across the world including California, United Arab Emirates and Chile.
Total has a market cap of $114.93 billion, a P/E ratio of 38.90, an enterprise value of $150.05 billion and a P/B ratio of 1.19.
According to GuruFocus, Total has a 5/10 financial strength rating with a 0.45 cash to debt ratio, ranking it higher than 57% of the 69 companies in the Global Oil & Gas Integrated Industry. The company also has a 7/10 profitability and growth rating.
Arnold Van Den Berg recently sold out of his holding in Total. He may have been influenced to sell because the company has reported declines in cash flow from its operating activities over the previous year. The followng is from the company’s most recent SEC filing:
- In the first half 2016, cash flow from operating activities excluding the change in working capital at replacement cost of $1,318 million ($932 million in the first half 2015) was $2,457 million, a decrease of 17% compared to $2,946 million in the first half 2015.
- In the first half 2016, cash flow from operating activities excluding the change in working capital at replacement cost of $648 million (-$74 million in the first half 2015) was $873 million, a decrease of 8% compared to $949 million in the first half 2015.
- Cash flow from operating activities in the second quarter 2016, excluding the change in working capital at replacement cost of -$422 million (-$134 million in the second quarter 2015) was $1,138 million, a decrease of 27% compared to $1,566 million in the second quarter 2015.
- Cash flow from operating activities in the second quarter 2016 excluding the change in working capital at replacement cost of $1,298 million ($297 million in the second quarter 2015) was $2,281 million, a decrease of 24% compared to $3,010 million in the second quarter 2015.
In addition to the company’s declines in cash flow from its operations, it has also seen long-term declines in its per share revenue, gross margin, operating margin, and the company continues to issue new debt. Over the previous three years, Total has issued $20.9 billion in new debt, which is a severe warning sign for investors. All of these likely contributed to Van Den Berg's decison to sell out his stake in Total during the second quarter.
Below is a Peter Lynch Chart that shows Total is trading above its intrinsic value.
Cheers to your investment success.
Disclosure: Author does not own any shares of this company.
