8 Reasons Ensco Is A Compelling Bargain Right Now

| About: Ensco PLC (ESV)

The market just had its worst week since October 2008. Energy stocks fell almost 10% as falling oil prices hit the sector hard. The sector seems like a ripe area to look for beaten down bargains. One stock that I like here because of its solid dividend, low valuations and good growth prospects is Ensco.

Ensco (NYSE:ESV):

Ensco plc, together with its subsidiaries, provides offshore contract drilling services to the oil and gas industry. The company engages in drilling offshore oil and natural gas wells by providing its drilling rigs and crews under contracts with international, government-owned, and independent oil and gas companies. It has an offshore drilling fleet of 76 rigs comprising 7 ultra-deepwater drillships, 13 dynamically positioned semisubmersible rigs, 7 moored semisubmersible rigs, 48 jackup rigs, and 1 barge rig. (Business Description from Yahoo Finance)

8 reasons Ensco is a compelling bargain at $43:

1. Total is selling in the bottom half of its five year valuation range based on P/S, P/B and P/CF.

2. ESV pays a dividend yield of 3.3% which is generous for an oil services stock.

3. Ensco has bounced off the $40 to $45 range several times in the last year (See Chart, click to enlarge).

4. ESV has beat earnings estimates four of the last six quarters and sells for just over 7 times next year’s projected EPS.

5. An insider made a buy in July when the stock was in the $50’s.

6. Its acquisition of Pride International gives it access to the fast growing Brazilian and West African markets.

7. Political pressure and the need to expand domestic drilling should accelerate the reopening of the Gulf of Mexico to new permits in the near future.

8. ESV is priced significantly under analysts’ price targets. Credit Suisse has a price target on Ensco of $71 a share, S&P is at $61 and the median analyst price target on ESV is $62.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in ESV over the next 72 hours.