The day will come when a public company becomes worth $1 trillion. It’s a big number to swallow, but I think it’s possible…

When I say a company will one day become “worth $1 trillion,” I’m referring to when a company reaches a market capitalization, or the number of shares outstanding multiplied by its stock price, of $1 trillion. Frequently, record-breaking market capitalizations coincide with a huge market run up or stock market bubble. Many Japanese firms had the largest market caps in the world when the Nikkei exchange reached its peak in December 1989. After that, it started a steady downward slide.

A couple of companies have come close in recent years. PetroChina (NYSE: PTR) boasted a market cap of more than $700 billion back in 2007, while Microsoft (Nasdaq: MSFT) posted an eye-popping market cap of almost $600 billion back in 1999. Both companies currently sport market caps less than half of those peak levels.

The first trillion dollar firm could stem from a future bubble, but it very well could result from a company that gets there the old-fashioned way — by growing sales and earnings. Stock prices follow fundamentals over the long haul, so the only way a firm is going to get there is by improving operations and investors taking notice.

One massive firm that could potentially get there is the Brazilian energy giant Petroleo Brasileiro S.A. (NYSE: PBR). Better known as Petrobras, the company has very ambitious expansion plans and recently completed a nearly $67 billion capital raise campaign by issuing shares on both the Sao Paulo Stock Exchange in Brazil and New York Stock Exchange here in the United States.

Petrobras bills itself as the fourth largest energy firm in the world. The company reported $116 billion in sales and nearly $16 billion in earnings last year. Its current market capitalization is just over $200 billion — so it would need to grow five-fold to get to $1 trillion. But I think it could get there.

That’s because the word “ambitious” could be an understatement for Petrobras’ growth plans. The company expects to invest an astounding $224 billion during the next four years to grow its exploration and production capabilities in Brazil. This is projected to push annual oil production to 3.9 million barrels by 2014. Natural gas production will also rise to meet the demand it expects to reach 130 million cubic feet per day in Brazil by 2014.

Petrobras is controlled by the Brazilian government. In many cases, government intervention is seen as a drawback, as it can place political interests ahead of a purer profit motivation that shareholders demand. However, in this case the government serves as a backstop should Petrobras run into any snags as it develops its vast base of reserves. A partner with basically unlimited capital is also a bonus, provided the company earns an acceptable return on its investments, of course. The government was the primary purchaser of stock in the current share offering, which means its interests are firmly aligned with shareholders. It also means Petrobras can basically operate a monopoly in Brazil — last year it accounted for almost 99% of oil and natural gas production in the country last year.

Petrobras’ production and exploration activities are also in or very close to its home turf. It operates along Brazilian coastal basins, and the Brazilian federal government has granted Petrobras full access to drill and explore in the coastal regions it controls. Management refers to this as “privileged access,” which it certainly is. Dominance in one of the largest and fastest-growing emerging markets in Brazil is also an important privilege that will allow Petrobras to expand rapidly.

Petrobras’ current reserve base is the primary basis by which the company can expand. It will need to grow by nearly five times to achieve a $1 trillion valuation, but this is doable given it estimates 12.1 billion barrels of oil equivalent in reserves. More than 95% of these reserves are in Brazil and it represents about 14 years of production. Better yet, management thinks there is plenty more oil and gas to discover.

Action to Take —> Petrobras will soon begin extracting some of the largest oil finds ever. With an existing market cap of $226 billion, it won’t take much for it to reach $1 trillion within a decade — it may take less if growth continues in the double digits for three to five years.

Petrobras already accounts for about 20% of the world’s deep-water production and should increase its global share given the vast reserve base. Sales and earnings have expanded at a +26% average annual clip in the past five years and should grow at a similar level in the coming five years as the company ramps up its production capabilities to match its massive reserve finds.

Current company projections call for annual production to double within the next four years. This could put annual sales close to $250 billion and profits well over $30 billion. A similar level of growth in the subsequent four-year period means Petrobras has a good chance at having a market cap of $1 trillion within the next decade. This is obviously a long-term call, but it implies appealing annual returns of about +20% for investors.