Regular readers of my articles know that one of my favorite long term sectors in the market is the energy complex. The combination of high oil prices, new drilling technologies and increasing M&A activity provide strong tailwinds for the entire sector. I am particularly fond of smaller energy firms with consistently growing earnings and solid fundamentals that should make investors money just by continuing to execute against strategic plans, with a bonus of being strong acquisition targets. One such stock is Newpark Resources (NR).
Newpark Resources, Inc., together with its subsidiaries, provides fluids management, waste disposal, and well site preparation products and services primarily to the oil and gas exploration and production industry in the United States and internationally. The company operates in three segments: Fluids Systems and Engineering, Mats and Integrated Services, and Environmental Services. (Yahoo Finance).
8 Reasons to pick up Newpark at $8 a share:
- Newpark is showing consistent earnings improvement. The company is expected to make $.81 a share in FY2011. It is projected to earn $.94 in FY2012 and analysts are forecasting $1.07 in earnings for FY2013.
- It is selling in the bottom third of its five year valuation range based on P/E and P/CF.
- It has easily beat earnings estimates for four straight quarters.
- The stock is some 50% under most analysts' price targets. The mean analysts' price target on NR from the 10 analysts that cover it is $12.25 a share.
- Analysts are also expecting mid-teen revenue growth for both FY2012 and FY2013.
- There is little insider selling. Insiders have sold just around 1% of their shares over the past six months despite the rally in the market over the last half year.
- The stock has a low five year projected PEG (.79) and is selling at under 8 times forward earnings even given its robust revenue and solid projected earnings growth.
- Given its small market capitalization (around $900mm including debt), low valuations and strong growth prospects, NR could make logical acquisition target for a larger player in the oil services sector.