Jeffrey To
Long/short equity

Rowan Companies: Temporary Growth, Not As Cheap As It Seems

I recently read a very well-written and convincing article recommending investors to buy Rowan Companies (NYSE:RDC). The author's investment thesis was based on 3 factors:

1) RDC's forward P/E of 7.28 is the lowest in the S&P 500.

2) Despite the low forward P/E, RDC has "the sixteenth highest 5-year earnings growth rate in the S&P 500" of 30% per year. RDC's expansion towards the ultra deepwater space will spur additional growth, warranting a higher earnings multiple on the stock.

3) The stock is trading below NAV (for simplification, market cap < net PP&E + net cash).

For most stocks, these characteristics would make the company a screaming buy. However, also like most stocks, there is a valid...

Join Seeking Alpha PRO to read this archived article and 11,574 other archived articles
IDEA GENERATORXExclusive access to 10 PRO ideas every day
INVESTING IDEAS LIBRARYXExclusive access to PRO library of more than 15,000 ideas
SECTOR EXPERT NETWORKXExclusive access to all sector experts for direct consultation
PERFORMANCE TRACKINGXTrack performance of all PRO stock ideas
PROFESSIONAL TOOLSXProfessional Idea Filters to zero-in based on industry, market cap and more
"In just the first month of using PRO, I used it to generate two ideas which were actionable for me. As a result of these two positions, I have earned more than 20 times the annual subscription costs for PRO."Michael Yagemann, Greenbridge Capital
"I am pleasantly surprised with the scope of small and mid-cap coverage PRO offers. You can't find that any where else."Patrick Rice, Mainstay Capital Management
You may cancel at any time for any reason, and receive a prompt refund for membership on months paid and not used (max. 6 months). Details