Part 2: A Comprehensive Financial Ratio Analysis of Saudi Aramco vs. Industry Peers
Evaluating Saudi Aramco’s Financial Strengths, Profitability, and Market Position in the Oil and Gas Sector
Ratio Analysis of Saudi Aramco vs. Industry Peers
This ratio analysis evaluates Saudi Aramco's financial performance relative to its competitors in the oil and gas sector, including Chevron, ExxonMobil, Royal Dutch Shell, TotalEnergies, and BP. The analysis covers profitability ratios, liquidity ratios, debt-related ratios, asset management ratios, and market valuation ratios, focusing on Aramco's performance to highlight its strengths and areas for improvement.
1. Profitability Ratios
Return on Assets (ROA)
Saudi Aramco: 20.03%
Industry Average: Chevron (6.81%), ExxonMobil (8.12%), Royal Dutch Shell (3.87%), TotalEnergies (5.54%), BP (0.99%)
Analysis:
Aramco's ROA of 20.03% significantly outperforms its competitors, indicating high efficiency in using its assets to generate profits. The company's extensive oil and gas reserves enable it to excel in asset utilization.
Return on Equity (ROE)
Saudi Aramco: 23.52%
Industry Average: Chevron (10.06%), ExxonMobil (12.47%), Royal Dutch Shell (6.27%), TotalEnergies (9.70%), BP (3.51%)
Analysis:
Aramco’s 23.52% ROE is a standout, demonstrating superior efficiency in generating shareholder value. This reflects the company’s dominant market position and effective use of equity capital.
Profit Margin
Saudi Aramco: 21.86%
Industry Average: Chevron (9.13%), ExxonMobil (9.93%), Royal Dutch Shell (5.27%), TotalEnergies (8.06%), BP (1.39%)
Analysis:
Aramco’s profit margin of 21.86% is considerably higher than its peers, showcasing its ability to retain a substantial portion of revenue as profit. This highlights Aramco's operational efficiency, essential in the volatile oil and gas industry.
Operating Margin
Saudi Aramco: 43.59%
Industry Average: Chevron (11.39%), ExxonMobil (11.69%), Royal Dutch Shell (8.77%), TotalEnergies (12.32%), BP (9.03%)
Analysis:
Aramco’s operating margin of 43.59% is the highest in the industry, reflecting its superior operational efficiency. This indicates that Aramco excels in managing its core operations, even with the challenging cost structure in the oil sector.
Gross Margin
Saudi Aramco: 54.47%
Industry Average: Chevron (29.43%), ExxonMobil (22.62%), Royal Dutch Shell (14.19%), TotalEnergies (28.39%), BP (18.04%)
Analysis:
Aramco’s 54.47% gross margin is the highest among its peers, illustrating its ability to generate significant revenue from production activities with minimal direct costs. This gives Aramco a competitive edge, enabling it to maintain profitability during market downturns.
2. Liquidity Ratios
Current Ratio
Saudi Aramco: 1.89
Industry Average: Chevron (1.1), ExxonMobil (1.31), Royal Dutch Shell (1.35), TotalEnergies (1.1), BP (1.25)
Analysis:
Aramco’s current ratio of 1.89 is the highest among its peers, indicating strong liquidity and the ability to cover its short-term liabilities with ease.
Quick Ratio
Saudi Aramco: 1.56
Industry Average: Chevron (0.71), ExxonMobil (0.95), Royal Dutch Shell (0.83), TotalEnergies (0.59), BP (0.88)
Analysis:
Aramco’s quick ratio of 1.56 is also stronger than its competitors, suggesting a robust buffer of liquid assets to meet immediate obligations, excluding inventories. This further reflects Aramco's solid financial health.
3. Debt Ratios
Debt to Equity Ratio
Saudi Aramco: 19.34%
Industry Average: Chevron (19.33%), ExxonMobil (17.85%), Royal Dutch Shell (42.82%), TotalEnergies (45.09%), BP (91.35%)
Analysis:
Aramco’s relatively low debt-to-equity ratio of 19.34% reflects a conservative approach to debt financing, reducing financial risk. In comparison, BP and TotalEnergies have much higher ratios, indicating greater reliance on debt.
4. Asset Management Ratios
Asset Turnover Ratio
Saudi Aramco: 0.74
Industry Average: Chevron (0.75), ExxonMobil (0.82), Royal Dutch Shell (0.72), TotalEnergies (0.69), BP (0.67)
Analysis:
Aramco's asset turnover ratio of 0.74 is slightly below Chevron and ExxonMobil, but it is still strong compared to most of its competitors. This indicates that Aramco generates solid revenue from its assets, though there is potential for further optimization.
Inventory Turnover Ratio
Saudi Aramco: 9.67
Industry Average: Chevron (13.37), ExxonMobil (9.7), Royal Dutch Shell (8.55), TotalEnergies (6.69), BP (6.1)
Analysis:
Aramco’s inventory turnover of 9.67 is higher than BP and TotalEnergies, although slightly lower than Chevron and ExxonMobil. This suggests that Aramco manages its inventories effectively but could improve efficiency further.
Accounts Receivable Turnover
Saudi Aramco: 8.52
Industry Average: Chevron (9.53), ExxonMobil (10.35), Royal Dutch Shell (8.4), TotalEnergies (9.09), BP (6.78)
Analysis:
Aramco’s accounts receivable turnover of 8.52 is strong, indicating efficient collection of payments. However, it trails behind Chevron and ExxonMobil, suggesting there may be opportunities for improvement in credit management.
5. Market Valuation Ratios
Price to Earnings Ratio (P/E)
Saudi Aramco: 15.94
Industry Average: Chevron (17.13), ExxonMobil (15.14), Royal Dutch Shell (14.37), TotalEnergies (9.63), BP (242.89)
Analysis:
Aramco’s P/E ratio of 15.94 is in line with ExxonMobil and slightly below Chevron, suggesting that the market values its earnings similarly to its major peers. This indicates a reasonable market valuation.
Enterprise Value to EBITDA (EV/EBITDA)
Saudi Aramco: 6.92
Industry Average: Chevron (6.95), ExxonMobil (7.28), Royal Dutch Shell (4.12), TotalEnergies (3.85), BP (4.48)
Analysis:
Aramco’s EV/EBITDA ratio of 6.92 is close to the industry average, suggesting that its market valuation relative to its earnings before interest, taxes, depreciation, and amortization is on par with its peers.
6. Growth Ratios
Revenue Growth Rate (YoY)
Saudi Aramco: -6.68%
Industry Average: Chevron (-1.22%), ExxonMobil (-0.77%), Royal Dutch Shell (-15.81%), TotalEnergies (-13.97%), BP (-3.18%)
Analysis:
Aramco’s -6.68% revenue growth is in line with its peers, reflecting the challenges faced by the oil industry due to price fluctuations and geopolitical factors.
Earnings Growth Rate
Saudi Aramco: 43.40%
Industry Average: ExxonMobil (-0.30%), Royal Dutch Shell (96.60%), TotalEnergies (-21.90%)
Analysis:
Aramco’s 43.4% earnings growth is one of the highest in the industry, signaling robust profitability despite market challenges. This highlights Aramco's strong operational efficiency and effective management.
Dividend Growth Rate
Saudi Aramco: 33.22%
Industry Average: Chevron (7.95%), ExxonMobil (4.21%), Royal Dutch Shell (4.07%), TotalEnergies (-9.96%), BP (10.04%)
Analysis:
Aramco’s impressive 33.22% dividend growth rate reflects its strong cash generation capabilities. This growth is significantly higher than that of its competitors, emphasizing Aramco’s commitment to rewarding shareholders with growing dividends.
Conclusion
Saudi Aramco's financial ratios demonstrate its position as a dominant force in the oil and gas industry. The company excels in profitability with superior margins, high ROA, and ROE compared to its peers. Aramco's conservative debt approach and strong liquidity provide resilience in the face of market downturns. While revenue growth has slowed, its earnings and dividend growth remain strong, making Aramco an attractive long-term investment. With its operational efficiency and financial strength, Aramco continues to lead the industry in profitability and capital management.
Disclaimer:
Please note that I am not a financial advisor or investor. The information provided in this article is for informational purposes only and should not be construed as financial advice. Before making any financial decisions, you should conduct your own research and consult with a professional financial advisor to ensure that you are making informed choices based on your individual circumstances and risk tolerance.
References
Investing.com. (2025). Saudi Aramco Financial Reports. Retrieved from https://www.investing.com
Yahoo Finance. (2025). Saudi Aramco Corporation Financial Data and Analysis. Retrieved from https://www.yahoo.com/finance
Content generated with the assistance of OpenAI’s GPT-4 model (OpenAI, 2025).