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Oil has been dropping as global economic concerns over a slowdown increase. This has created some weakness in the stock market recently and even sharper drops in many oil services stocks. There is no doubt that the world will continue to consume energy, so it makes sense to consider buying the recent dip in the oil sector. After taking a closer look at a number of top oil services stocks, it becomes clear that Halliburton shares are deeply undervalued relative to other stocks. Here is a closer look at Halliburton and a couple of competitors:

Halliburton Company (HAL) is one of the largest oilfield services companies in the world. Like most stocks in the oil sector, Halliburton shares have declined substantially in the past couple of weeks, but the company is prospering from the increased demand for deepwater and shale, which is evident in the improving financial results. Revenue for 2011 was $24.8 billion, which was an increase of 38% from 2010. Net income for 2011 was $3 billion, or $3.26 per share and analysts expect even stronger results in 2012. There is one major overhang on this company and that is unresolved claims from the oil spill in the Gulf of Mexico. This seems to be the one solid reason for the stock to trade below its peers, however, there is a good chance the claims will be settled. Once they are, the shares could move much higher. The stock trades for about half the 52-week high and for about 7 times earnings estimates. Halliburton's leading position in the industry was recently recognized by Fortune magazine which included the company in the "World's Most Admired Companies" list for 2012. This bargain stock is likely to reward investors in the long run, and the biggest indicator of undervaluation comes when you compare Halliburton to its peers (see below). Halliburton shares are currently one of the least expensive ways to buy a fundamentally sound company in the oil sector:

Key Data Points From Yahoo Finance:
52-Week Range: $27.21 to $57.77
Dividend: 36 cents, which provides a yield of 1.1%
2012 Earnings Estimate: $3.78 per share
2013 Earnings Estimate: $4.39 per share
P/E Ratio: about 8 times earnings

McDermott International (MDR) is an engineering and construction services company, primarily for offshore oil and gas projects. While this company is not a direct or completely comparable stock to Halliburton, it is in the same industry and benefits from the expansion and health of the oil industry. Oil industry investors must evaluate where their capital can be deployed and part of that analysis must be what offers them the best valuation. It is interesting to consider that these shares trade for about 13 times earnings, which is a premium of around 60% when compared with Halliburton's price-to-earnings ratio of just about 8.

Key Data Points From Yahoo Finance:
52-Week Range: $9.34 to $25.94
Dividend: none
2012 Earnings Estimate: 89 cents per share
2013 Earnings Estimate: $1.23 per share
P/E Ratio: about 13.4 times earnings

Schlumberger Limited (SLB) has some similarities to Halliburton and it provides project management and other services to oil and gas companies. This company is also benefiting from the recent strength of the oil industry and it reported full-year 2011 revenue of $39.54 billion and earnings of $3.66 per share. The strength of the business and balance sheet has allowed Schlumberger to increase the dividend by 10% recently. Schlumberger is an industry leader and it deserves to trade higher over time, however, when you see that you can buy Halliburton shares for just around 8 times earnings versus Schlumberger's at about 14, it really makes sense to consider Halliburton shares today. In time, Halliburton will likely put the oil spill claims behind it, and the stock should trade closer to the valuation that Schlumberger receives today.

Key Data Points From Yahoo Finance:
52-Week Range: $54.79 to $95.53
Dividend: $1.10, which provides a yield of 1.5%
2012 Earnings Estimate: $4.69 per share
2013 Earnings Estimate: $5.72 per share
P/E Ratio: about 14.4 times earnings

Disclosure: I am long HAL.

Disclaimer: Data sourced from Yahoo Finance. No guarantees or representations are made. Please consult a financial advisor before making investments