Despite a grim 2023, Aramco shares remain very popular among Saudia investors and top-performing international funds. While you can buy Saudi Aramco stock directly, sometimes it is worth considering an ETF with Aramco representation.
Saudi Arabian Oil Co., also known as Aramco, is a global petroleum and natural gas company based in Saudi Arabia. Founded in 1933, Aramco became a publicly traded company in 2019, with its initial public offering (IPO) being the largest in history.
Today, Aramco is listed on the Saudi Stock Exchange (Tadawul) under the ticker symbol "2222" and is considered one of the most valuable companies in the world, with its shares being held by a diverse range of investors, including institutional and individual investors, as well as sovereign wealth funds.
Aramco shares are also included in various global indices and exchange-traded funds (ETFs) that track the performance of the energy sector and are now one of the top holdings in the largest Frontier and Emerging Markets ETFs (KSA).
Aramco Shares - Research and Ratings
- Is Aramco stock undervalued compared to its fair value, analyst forecasts, and its price relative to the market?
- What is the analyst's 12-month Aramco share price forecast?
- What are Aramco’s future growth expectations?
- How has Saudi Aramco stock performed over the past 5 years?
- Should you buy Aramco shares or invest in ETFs with Aramco representation?
Understanding Aramco Shares: A brief history
Aramco is one of the world's largest integrated energy and chemicals companies, creating value across the hydrocarbon business chain, as well as driving economic and societal development in communities around the world that depend on energy supplies.
We can divide Aramco's growth into six segments historically:
The Birth of Arabian Oil: Aramco began as a subsidiary of California Arabian Standard Oil Company in 1933 after a concession agreement was signed between Saudi Arabia and SOCAL. Drilling for oil began in 1935, and despite initial setbacks, the chief geologist recommended they continue drilling.
- Radical expansion across Saudi Arabia: Aramco grew rapidly from the late 1940s and reached record-breaking oil production milestones, expanding their distribution efforts through the completion of the Trans-Arabian Pipeline in 1950 and the discovery of the Safaniyah field in 1951, which became the world's largest oil field.
- Making Aramco's name: In the 1970s, the Saudi government increased its interest in Aramco and eventually established Saudi Aramco in 1988, with a focus on becoming an integrated petroleum enterprise. This included the formation of joint ventures and partnerships with Texaco and Shell, which evolved into Aramco's ownership of North America's largest crude oil refinery at Port Arthur, Texas.
- Aramco becomes a Global Company: In the 1990s, Aramco extended their partnerships and international investments by acquiring interests in SsangYong Oil Refining Company in South Korea, Petron Corporation in the Philippines, and Motor Oil (Hellas) Corinth Refineries S.A. in Greece.
- Innovation: Aramco invested in advanced technology to discover and extract crude oil, developing POWERS, a high-resolution reservoir simulator, in 1997 - 2000, they built a state-of-the-art Research and Development Center in Dhahran to increase discovery and recovery, reduce costs, and enhance safety.
- Transformation: Saudi Aramco diversified into non-traditional markets and invested in new technological solutions to achieve cleaner, more efficient production and consumption of oil. They envision transforming billions more barrels of oil and trillions of cubic feet of gas into multiple streams of value while remaining a reliable supplier of sustainable energy to the world.
Aramco shares are distributed among 4 categories:
- State or Government: 82.2%
- General Public -17.6
- Institutions - 0.165
- Individual Insiders - 0.00212%
The top 25 shareholders own 82.35% of the company, while the top 5 shareholders are:
- Saudi Arabia government - 82.2%
- The Vanguard Group, Inc. - 0.051%
- BlackRock, Inc. - 0.031%
- GQG Partners LLC - 0.01%
- Capital Research and Management Company - 0.0071%
Saudi Amarco stock - Fundamental Analysis and Financial Ratings
See the latest Aramco stock price analysis, including valuation, future growth, past performance, and more to help you make more informed investing decisions.
Valuation
Is Amarco stock undervalued compared to its fair value, analyst forecasts, and its price relative to the market?
- Aramco "2222" is expensive based on its Price-To-Earnings Ratio (16x) compared to the Asian Oil and Gas industry average (12.1x).
- Aramco "2222" is good value based on its Price-To-Earnings Ratio (16x) compared to the estimated Fair Price-To-Earnings Ratio (10.1x).
- Aramco "2222" is trading at (SAR33.00) which is above analysts' estimate of fair value (SAR13.46)
Future Growth
Saudi Arabian Oil's revenue and earnings are forecast to decline at 3.8% and 0.5% per annum respectively. EPS is expected to decline by 0.3% per annum. Return on equity is forecast to be 25.9% in 3 years.
- Earnings vs Savings Rate: Aramco's earnings are forecast to decline over the next 3 years (-0.5% per year).
- Revenue vs Market: Aramco's revenue is expected to decline over the next 3 years (-3.8% per year).
- Future ROE: Aramco's Return on Equity is forecast to be high in 3 years time (25.9%).
Past Performance
How has Aramco stock performed over the past 5 years?
- Aramco has high-quality earnings.
- Aramco's current net profit margins (24.4%) are lower than last year (26.4%).
- Aramco's earnings have grown by 11.8% per year over the past 5 years.
- Aramco's has had negative earnings growth over the past year, so it can't be compared to its 5-year average.
- Aramco's Return on Equity (26.2%) is considered high.
Financial Health
What is Aramco's financial position?
- Aramco's short-term assets (SAR731.7B) exceed its short-term liabilities (SAR317.6B).
- Aramco's short-term assets (SAR731.7B) exceed its long-term liabilities (SAR423.3B).
- Aramco has more cash than its total debt.
- Aramco's debt-to-equity ratio has increased from 8.6% to 13.4% over the past 5 years.
- Aramco's debt is well covered by operating cash flow (231%).
- Aramco earns more interest than it pays, so coverage of interest payments is not a concern.
Dividend
Aramco, a company that pays dividends, currently offers a yield of 5.65%, which is adequately supported by its earnings.
- Aramco's dividend (5.65%) is higher than the bottom 25% of dividend payers in the Saudi market (1.56%).
- Aramco's dividend (5.65%) is low compared to the top 25% of dividend payers in the Saudi market (4.59%).
- Whilst dividend payments have been stable, Aramco has been paying a dividend for less than 10 years.
- Aramco's dividend payments have increased, but the company has only paid a dividend for 4 years.
Aramco's Shares Price Forecast
What is the analyst 12-month Aramco shares price forecast, and do we have any statistical confidence in the consensus price target from analysts?
Source: simplywall.st
According to simplywall.st, the Aramco stock 12-month target price is less than 20% higher than the current share price.
Wallet investor site suggests that the price of Aramco stock will drop for the remainder of 2024 compared to the current price, ending the year at an average price of 29.694 SAR.
There are no 5-year Saudi Aramco shares price forecasts and price predictions.
Important: When considering Saudi Aramco's fundamental analysis, financial rating and price predictions, it’s important to remember that high market volatility and changing economic environment makes it difficult to give long-term estimates. As such, analysts and algorithm-based platforms can and do get their ratings and predictions wrong. Always do your own research before making an investment decision. And never trade or invest more than you can afford to lose.
Saudi Aramco Stock Price - Technical Analysis
The weekly chart of Aramco's share price illustrates an upward correctional movement, potentially aiming for the 2022 high at 39.30 SAR.
The price has consistently remained above the 100-day simple moving average, suggesting the potential for completing its corrective cycle towards the resistance level at 37.50 Saudi riyals and trading above the 0.61% Fibonacci retracement level again. The Relative Strength Index indicates buying momentum, and as long as the price holds above the recent support levels at 30.00 - 31.00 Saudi riyals, the bulls may continue to drive the upward trend.
How to Invest in Aramco Stock
Some investors want to take an active hand in managing their investments, while others prefer to set it and forget it. Your preference may change but decide on an approach to get started.
For most people, stock market investing means choosing among these two investment types:
Individual Aramco shares
If you’re after a specific company, you can buy a single share or a few shares to dip your toe into the stock-trading waters. Building a diversified portfolio out of many individual stocks is possible, but it takes significant investment and research.
If you go this route, remember that individual stocks will have ups and downs. If you research a company and choose to invest in it, think about why you picked that company in the first place if jitters start to set in on a down day.
Traditional stockbrokers allow you to invest in local stocks. However, you might not be able to invest in international stocks listed on the major stock exchanges, global ETFs, and other assets.
ETFs with Aramco holdings
Aramco stock (or any single stock, for that matter) can be a very volatile investment. You can manage the risk you see extreme highs and lows by diversifying your investment holdings. An ETF, for instance, contains a basket of individual stocks. When you invest in a fund, you also own small pieces of each of those companies.
If you want an ETF with Aramco representation, you might consider iShares MSCI Saudi Arabia ETF (KSA). BlackRock's iShares is the largest provider of ETFs as calculated by assets under management.
The fund can be suitable for Arab and foreign investors who want liquid and diversified exposure to the top 10 companies listed on the Saudi Stock Exchange:
Why invest in Saudi Aramco Shares via KSA?
The iShares MSCI Saudi Arabia ETF seeks to track the investment results of a broad-based index composed of Saudi Arabian equities. With net assets of almost $1B, The iShares MSCI Saudi Arabia ETF (KSA) is the largest exchange-traded fund that seeks to track the investment results of an index composed primarily of frontier market equities along with select emerging market equities.
- Access to the Saudi Arabian stock market, which has historically been closed to foreign investors.
- Targeted exposure to a country with growth potential. with one-click access to a virtually untapped investment portfolio, including Saudi Stock Exchange and TASI index exposure.
- Use to seek long-term growth and diversification.
How to Get Started with CAPEX.com
Here is how to buy and trade stocks, ETFs and other assets with an international, highly regulated broker like CAPEX.com:
- Choose which type of account you want to use. Your first concern should be your risk appetite and time horizon. If you want to buy and hold shares, open an Invest account. If you want to speculate on price movements (including falling prices) with zero commission and leverage, open a CFD trading account.
- Create an account. Regardless of your chosen account, you need to register and complete the KYC process to verify your identity.
- Fund your account with fiat money. Before buying and trading stocks and ETFs, you need to fund your exchange account with U.S. dollars, Euros, or other currencies.
- Place your order. Click on the "Search" icon located in the left panel or by clicking on "ETFs" and then select the instrument, such as "iShares MSCI Saudi Arabia ETF”.
When trading stocks, the CFDs (contracts for difference) are stored in your account and are more liquid than the underlying asset.
However, you should be aware that CFD trading is fast-moving and requires close monitoring. As a result, traders should be aware of the significant risks when trading CFDs. There are margins you need to maintain; if you cannot cover reductions in values, your position might be closed, and you'll have to meet the loss no matter what subsequently happens to the underlying asset.
With CAPEX, you can trade CFDs on +2.000 stocks and invest in +5.000 stocks and ETFs with ownership.
Free trading tools and resources
Before you start investing in shares, you should consider using the educational resources we offer like CAPEX Academy or a demo trading account. CAPEX Academy has lots of free trading courses for you to choose from, and they all tackle a different financial concept or process – like the basics of analyses – to help you to become a more informed trader.
Our demo account is a great place for you to learn more about leveraged trading, and you’ll be able to get an intimate understanding of how CFDs work – as well as what it’s like to trade with leverage – before risking real capital. For this reason, a demo account with us is a great tool for investors who are looking to make a transition to leveraged trading.
Sources:
- Driven by the curiosity to explore | Aramco
- Largest Saudi Arabian (Tadawul) Stocks by Market Cap - Simply Wall St
- Saudi Arabian Oil Company (2222.SR) Stock Price, News, Quote & History - Yahoo Finance
- Saudi Aramco Stock Forecast: - 2222 Stock Price Prediction, Long-Term; Short-Term Share Revenue - Walletinvestor