Nabors Industries (NBR), like most of the drilling services sector has been battered over the past nine months. However, this deeply undervalued stock has had some recent positives that the market should eventually reward.
Recent positives on NBR:
- A director made a $1mm purchase in late April at higher prices.
- It was the subject of a very positive profile piece in Barron's this weekend.
- It has little exposure (2 rigs) to that basketcase of an E&P outfit known as Chesapeake Energy (CHK).
"Nabors Industries (NBR) operates as a land drilling contractor worldwide. The company markets approximately 499 land drilling rigs for oil and gas land drilling operations in the United States Lower 48 states, Alaska, Canada, South America, Mexico, the Middle East, the Far East, the South Pacific, Russia, and Africa." (Business description from Yahoo Finance)
4 reasons NBR has great value at $13 a share:
- The stock is selling at the bottom of its five year valuation range based on P/E, P/B, P/S and P/CF.
- The stock is ridiculously cheap at 63% of book value and under three times operating cash flow. It also is making good progress selling $4.8B in non-core assets to lower its debt levels.
- The stock has a very low five year projected PEG (.29). The median analysts' price target by the 21 analysts that cover the stock is $26 a share, double its current price level.
- The stock has bounced off at just below these levels before and the stock was over $25 a share less than a year ago (See Chart)