Energy investors have over a month of deep pain as the sector has been hit hard by concerns about slowing economic growth and overall turmoil coming out of Europe. I have never been one to call for catching falling knifes, but the sector is getting very cheap. Establishing small positions on dips and averaging down should be a good long term strategy even if it causes some anxiety in the short term. One stock that has been hit by low natural gas prices but seem significantly undervalued is Patterson -UTI Energy (PTEN).
Patterson-UTI Energy - "Patterson-UTI Energy, Inc., through its subsidiaries, provides onshore contract drilling services to oil and natural gas exploration and production companies in the United States and Canada". (Business description from Yahoo Finance)
7 reasons PTEN is a long term bargain at just over $14 a share:
- The company has a forward PE of around 7.5 times 2013's earnings estimates, a huge discount to its five year historical average (20.98).
- Insiders are holding firm as there have been no notable sales over the past year.
- The stock is selling at 83% of book value and does not have the debt levels that have negatively impacted Chesapeake (CHK).
- The market seems to be deeply discounting its growth prospects looking at its five year projected PEG (.39)
- The stock is selling near the bottom of its five year valuation range based on P/E, P/S, P/CF and P/B.
- PTEN is significantly under analysts' price targets. The median analysts' price target on PTEN is $22 by the 22 analysts that cover the stock.
- The stock is approaching two year technical support (See Chart).
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in PTEN over the next 72 hours.