Time to Step on the Gas: PetroChina is a Steal

When analyzing stocks, my favorite valuation metric is the PEG ratio. This ratio is simply the product of the price the company sells for divided by the company's forward earnings divided by the company's 5 year projected growth rate. Any stock selling under 1 is generally seen as being a good buy. Any stock selling for a PEG of less than 0.5 is considered a steal.

When PetroChina (PTR), the largest integrated oil and gas company in China, sells for 0.38, it is time to buy. Furthermore, the company has a virtual monopoly on its domestic market, due to the fact that it is partially state owned, and receives preferential treatment from the Chinese government in various matters for the same reason. According to Morningstar, PetroChina now yields 4.37 percent in terms of its dividend, which is much higher than the industry average of 1.43 percent. Morningstar goes further stating that the company's forward earnings yield (the annual return the company would generate if all of its profits were distributed to shareholders in the form of dividends) is also much greater than other companies in the Oil and Gas industry. In short, this company is a screaming buy for long term investors and should be bought aggressively.

PTR 1-yr chart

Disclsoure: Author has no position in PTR.