Saudi Aramco operates differently from any other company in the world in the industrial city of Dhahran, on the eastern edge of Saudi Arabia where the desert flattens toward the Persian Gulf and the oil infrastructure has been building since American engineers arrived in the 1930s to help develop what turned out to be one of the largest hydrocarbon deposits on earth. It takes a time to digest each of the enormous numbers it generates in relation to its staff and valuation before you can hold them together.
1.67 trillion Saudi riyals are earned annually. 348.04 billion riyals in net income and 76,660 workers. This translates to about 21.8 million riyals in revenue per employee and 4.54 million riyals in net income per employee. These figures do not represent the productivity of individual workers, but rather the remarkable economics of sitting atop a hydrocarbon reserve the size of Saudi Arabia and having developed the infrastructure to extract and sell it effectively over a ninety-year period.
| Category | Details |
|---|---|
| Company Name | Saudi Arabian Oil Company (Saudi Aramco) |
| Ticker Symbol | 2222.SR (Tadawul — Saudi Stock Exchange) |
| Founded | 1933 |
| IPO Date | December 11, 2019 |
| Headquarters | Dhahran, Saudi Arabia |
| CEO | Amin bin Hasan Al-Nasser |
| Employees | ~76,660 |
| Current Share Price | 27.62 SAR (+0.22%) |
| Market Capitalization | 6.63 Trillion SAR (~$1.77 Trillion USD) |
| P/E Ratio (TTM) | 18.28 |
| Dividend Yield | 5.03% |
| Annual Net Income | 348.04 Billion SAR |
| Annual Revenue | 1.67 Trillion SAR |
| Beta (1Y) | 0.68 |
| Reference Website | aramco.com |
With a market value of nearly 6.63 trillion Saudi riyals, or $1.77 trillion at current currency rates, the company is currently trading at 27.62 SAR, up 0.22% in recent trading. When investors examine Aramco and question whether the valuation is reasonable, the P/E ratio of 18.28 generates the most intriguing discussion. By the standards that growth-oriented markets apply to companies with strong earnings, a P/E below 19 appears modest for a company that generates $4.5 million riyals per employee in annual net income, maintains a 5.03% dividend yield, and carries a beta of 0.68, meaning it moves significantly less than the broader market.
The comparison of the energy industry is more pertinent than the comparison of technology, and income-oriented investors find a combination of 18 times profits and a 5% yield to be genuinely appealing inside large integrated oil corporations worldwide.
Saudi Aramco’s December 2019 initial public offering (IPO) raised over $29 billion, making it the highest in history at the time. For a brief period, the company’s market valuation was close to $2 trillion. Due in part to valuations that foreign investors were unwilling to accept at the levels Crown Prince Mohammed bin Salman had initially targeted, the listing on the Tadawul, Saudi Arabia’s stock exchange, was mainly aimed at domestic and regional investors rather than the global institutional audience that a NYSE or London listing would have reached.
The stock has since fluctuated within a range that reflects changes in oil prices and the company’s steady earnings delivery. The company eventually floated at a valuation that Saudi retail investors and institutional buyers from the Gulf region supported.
What is essentially an upstream crude oil and gas industry gains a diversification dimension from the downstream section, which includes refining, petrochemicals, logistics, and power generation. In Asia, where long-term demand growth for petroleum products is more clearly defined than in areas where the energy shift is progressing more quickly, Aramco has been investing in petrochemical integration and refining capacity. Moving downstream and globally lowers the company’s direct exposure to spot prices for crude oil while fostering ties with end markets that increase its control over the value chain from wellhead to finished product.
When investors view Aramco from an income perspective instead of a capital appreciation standpoint, the dividend yield of 5.03% is the metric that most directly impacts the investment case. In a market where bond yields and alternative income sources are vying for the same capital allocation decisions, a 5% yield from one of the most financially stable companies in the world—one supported by the sovereign wealth of Saudi Arabia, with production costs among the lowest of any major oil producer globally—is a unique kind of proposition.
A political component to dividend sustainability is introduced by Saudi Arabia’s economic diversification program, Vision 2030. The government depends on Aramco’s dividends as a source of public revenue to finance its non-oil economic development, which establishes a ceiling on the company’s freedom to reallocate funds to other purposes as well as a commitment to maintaining the payout.
Looking at Aramco’s numbers, it seems that the stock is priced for a world that will continue to use oil at current rates for longer than the energy transition narrative suggests. The 18x earnings, 5% yield combination looks very different from the narrative that the stock of one of the biggest fossil fuel companies in the world should naturally command a discount.