wax

The Long Case for KBR, Inc.

There is no unrecognized value in KBR, Inc. (NYSE: KBR). None. Or at least I didn’t recognize any value. As the matter of fact, the stock is probably a little overpriced at its recent close of $35. But hey! That's just my opinion.

While the company does seem to have a huge backlog of work, as the article points out, all of that work may not convert to sales because it may not all get funded. So to me, the backlog of work has no value; plenty of potential, but no value.

I took a look at the company's latest 10-K, for fiscal year ending December 2006 and based on that information, was able to determine that to me, the stock has a reasonable value in the $28-$30 range.

If I wanted to own this one, which at the moment I don't, I would set a buy target at $14, a first sell target at $27 and a close target at $30.

From a fundamental perspective, based on my calculations and information from the company's December 2006 10-K, the company has Free Cash Flow of $0.77, Return on Invested Capital of 7%, a Tangible Book Value of $10.70, and a PE of 53.8. Are you ready to buy yet?

For the traders, based on a recent $35 close, the stock has first resistance at $39.31, and first support at $29.56, meaning at current pricing levels there is 60% more downside risk than upside potential. How about now? Wanna own some of this one?

I suppose an article showing up at Seeking Alpha by the folks at Value Investing Insight should grab headlines, after all how else will VII sell newsletter subscriptions?

Wax