Now that the even the President has highlighted the growing domestic energy supply, it might pay to look for additional opportunities to invest in the energy sector. Here are two oil services firms that look undervalued at current prices.
Nabors Industries (NYSE:NBR) - "Nabors Industries Ltd. operates as a land drilling contractor worldwide. It markets approximately 550 land drilling rigs for oil and gas land drilling operations in the United States Lower 48 states, Alaska, Canada, South America, Mexico, the Caribbean, the Middle East, the Far East, Russia, and Africa. The company also markets approximately 555 rigs for land well-servicing and workover work in the United States and approximately 172 rigs for land well-servicing and workover work in Canada". (Business Description from Yahoo Finance)
4 reasons Nabors is a solid value at $17 a share:
- The company is rapidly increasing earnings. It made $1.13 a share in FY2010, looks to earn $1.46 in FY2011, and analysts project it to make $2.26 in FY2012.
- The median analysts' price target on Nabors is $26. Credit Suisse has an "outperform" rating on Nabors as well.
- The stock is cheap, at less than 8 times forward earnings and a five year projected PEG of just .56.
- The stock looks like it has bottomed and just crossed its 100 day moving average (See Chart).
McDermott International (NYSE:MDR) - "McDermott International, Inc. operates as an engineering, procurement, construction, and installation company worldwide. The company focuses on designing and executing complex offshore oil and gas projects. It involves in the fabrication and installation of fixed and floating structures, and bottom-founded production platforms; installation of pipelines and subsea systems; and provision of engineering and procurement, and project management and procurement services". (Business Description from Yahoo Finance)
4 reasons MDR is a buy at under $12 a share:
- McDermott has a rock solid balance sheet with over $2 in net cash per share on the books.
- The stock looks like it has bottomed in the current price range (See Chart).
- The stock is selling at 89% of revenues, and a five year projected PEG of just 1.
- Stifel Nicolaus just initiated the stock to a "Buy" and the median analysts' price target on MDR is $15.
Disclosure: I am long (MDR).