As is common knowledge, the price of crude oil has plummeted this year and shares of the international oil companies have plummeted along with it. This can be an opportunity, as Royal Dutch Shell (RDS.A) (RDS.B) is trading near the lowest point since the current share started trading 15 years ago. Adding insult to injury, the stock has lagged the market severely since 2015 and even more so this year.
Source: Seeking Alpha/TradingView.
However big the normalization opportunity may seem, there are several problems with Shell’s investment thesis that have been brewing for longer. In this article, I have four charts that show the company’s deeper issues. Firstly, profitability has been sub-par for years, while the P/E multiple increased in anticipation of a recovery of the oil price. So, in that respect, 2020 did at a greater speed to the stock’s valuation what probably should have been done earlier