Helmrich & Payne, Inc. (NYSE:HP) is displaying incredibly strong fundamentals that ought to make you give adding the company's stock to your portfolio. Among the factors that make HP attractive for investment are: (1) a strong balance sheet with minimal debt, (2) favorable valuation measures and trends, (3) growth in EPS and cash flow, (4) margins that significantly outperform industry peers, (5) a healthy and growing dividend, and (6) good management of short-term/current assets.
HP boasts a very impressive balance sheet with little long-term debt.
|Balance Sheet Ratios|
|Total Debt / Assets (NYSE:TTM)||3.69%||22.35%|
|Total Debt / Equity||5.32%||49.26%|
|L-T Debt /Equity||3.93%||43.04%|
Helmrich & Payne compares favorably to its peers in the energy equipment & services industry across a variety of valuation metrics.
|P/E (5 Yr. Avg.)||12.98||19.86|
|Price / Cash Flow||7.68||10.32|
|Price / Book||2.14||2.97|
Although PEG Ratios can sometimes skew the direct comparison of P/E ratios, the fact that HP trades at a much lower Price / Cash Flow metric is a major plus in my opinion--especially since HP has grown its overall cash flow from $305M in 2011 up to $352M in 2013 while relying on strong cash flows from operations, paying off debt, and still making capital expenditures and other investments.
EPS & Cash Flow:
HP has shown strong positive growth relative to its industry competitors in terms of EPS and cash flow growth, both of which or indicators of the overall health of a company and the company's ability to produce returns to share holders through the capital appreciation of the share price.
|EPS & Cash Flow Growth|
|EPS Growth (TTM vs. Prior TTM)||+26.38%||+16.27%|
|Capital Spending Growth (5 Yr. Avg.)||+2.77%||+11.36%|
|Cash Flow Growth Rate (5 Yr. Avg.)||+11.85%||+9.31%|
The figure provided above that highlights another interesting aspect of upside for HP. Despite being in the 92nd percentile for market capitalization in their industry, the firm is making fewer capital investment compared to their peers and competitors. This indicates that there is a good chance based on the firm's structure that the firm will be able to continue to perform well, growing EPS and cash flow, without having to make large capital expenditures.
A sign of operating efficiency, HP boast some of the highest margins in the energy equipment & services industry.
(Most Recent Quarter, Annualized)
This implies that as the company increases revenues--which HP has grown at an average of 10.71% annually over the past 5 years--they will continue to grow their bottom line at a faster rate than their industry peers.
The firm boasts a respectable dividend yield and has demonstrated both a willingness and ability to grow the divident yield in a sustainable fashion.
|Dividend Growth (5 Yr. Growth)||65.72%|
I fully expect HP to continue to grow their dividend in the quarters and years to come. They certainly have plenty of room to do so based on the firm's payout ratio.
The company's turnover ratios for current and short-term assets indicate that the firm is doing a good job of managing assets.
Based on Helmrich & Payne's strong fundamental performance and bright outlook, the company's stock deserves serious consideration as a long position in your portfolio.