Global Industries: Riding the Wave of Oil

During our weekly review of industry performance, we always have an eye on hot stocks in the top performing sectors. Global Industries Ltd. (GLBL) is one worth watching.

GLBL provides offshore construction, engineering and support services including pipeline construction, platform installation and removal, and diving services to the oil and gas industry in the Gulf of Mexico, West Africa, Asia Pacific, Middle East/India, South America, and Mexico’s Bay of Campeche.

From our vantage point, the most compelling reason we like Global Industries is based on its stock chart. According to our technical analysis, as you see on the chart below, GLBL should find support around $4 per share and upside to nearly $7. That’s roughly a 3:1 reward to risk ratio.

Valuation wise, we see merit in the oil & gas equipment & services company. GLBL trades at a forward P/E of just 5.46. In the face of expected 40% plus growth of the bottom in the year ahead, a P/E of less than 6 is attractive. With a PEG Ratio of .25, a price to sales of .44 and trading below its book value of $6.38 per share, GLBL has plenty of reasons to move closer to $7 than $4.

The company’s management team also expects the Global Industries to return profitability during the first six month of 2009. Perhaps that’s why 3 of the 7 analysts covering GLBL have raised their outlook for the 1st quarter. In our opinion, GLBL is a candidate for earnings surprises and a higher share price.

Comments

[Mad Hedge F...:]

Hang ten baby, from California! The recent 69% leap in crude prices from $32 to $54 may mean that the next spike has already begun. We have been sowing the seeds for the last nine months. The US drilling rig counts has dropped by half to 1000, and it could go as low as 900. Credit squeezed companies have chopped exploration budgets to the bone. The few new wells that are being drilled are becoming increasingly expensive to bring on line. Mexico is the second largest foreign supplier of crude to the US, delivering 1.2 million barrels a day. But production at its main Cantarell field in offshore Yucatan is falling off a cliff, and the country will soon become a net importer. Buy that Prius while the lots are still full.

Mar 27 11:38 AM