Halliburton Company (HAL) shares have dropped to a level that should interest value investors. This leading provider of services to the oil and gas industry is trading at just $30 per share now, and the stock is showing signs that it might be at or near a bottom. Here are a few reasons to consider buying the stock while it is near the 52-week low:
This stock is trading for close to half of the 52-week high and this appears to be through no fault of its own. Halliburton management is executing well and the company has recently posted solid results. For the first quarter of 2012, net income was $627 million or 68 cents per diluted share on a GAAP basis. Results would have been 20 cents per share higher, but the company took a $191 million expense for liability relating to the oil spill in the Gulf of Mexico.
Halliburton shares are oversold and based on a number of metrics, the stock is a bargain. For example, while the average stock in the S&P 500 Index currently trades for about 13 times earnings, Halliburton shares trade at about 8 times earnings. The company has rock solid financials with nearly $3 billion in cash on the balance sheet. Plus, it pays a dividend yield of 1.1%, and based on earnings power, the dividend has room to grow significantly in the future.
Although Halliburton shares have dropped with the price of oil, the company does not have a direct profit margin link to the price of oil like a major oil company would because its profits come from providing services to oil and gas companies, not from the actual commodity. This means that even as oil has dropped in value, it is not going to impact Halliburton's profit margins like it will for a oil producer. Although oil has come down in price, it is still trading at very profitable levels for oil companies and that means Halliburton is likely to keep receiving large contracts.
Key Data Points For Halliburton From Yahoo Finance:
Current price: $30
52-Week Range: $27.21 to $57.77
Dividend: 36 cents per share which yields 1.1%
2012 Earnings Estimate: $3.51 per share
2013 Earnings Estimate: $3.97 per share
P/E Ratio: about 8 times earnings
Data is sourced from Yahoo Finance. No guarantees or representations are made. Please consult a financial advisor before making investments.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.