LukoilBP Comparison Case Study Example | Topics and Well Written Essays - 1250 words

LukoilBP Comparison - Case Study Example 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