I'll take a few shares of BJS at current price with a view to building a small position in this oil services company if stock continues to fall.
According to 3/29/07 Barron's article by D. Defotis,
"While its business is predominantly in North America, BJ Services operates in roughly 50 countries. International demand should remain strong with large, long-term projects financed by the major oil companies and other independent oil and gas producers, according to S&P.
And with the stock more than 30% below its 52-week high, 'it should benefit from the natural-gas turnaround that we think will come in the next couple years,' says one money manager who has been watching the stock.
At roughly 10x estimated 2007 earnings, BJ Services shares are cheap relative to most oil and gas equipment-and-services companies, according to Thomson Financial/Baseline.
That multiple reflects analysts' 13% reduction in 2007 earnings estimates over the past six months, according to Baseline."
(Lower rig counts in Canada (less drilling) is apparently the short term prime reason for the decline in BJS stock.)
Company's been profitable 9 of past 10 years. Profit margins can be decent. P/sales looks relatively low to me. Yahoo shows a forward (9/'08) p/e a little under 10x. I eyeball fair value that p/e should be min. 11-12x, if company just has an average year.
Ignoring 1999 when company wasn't profitable, the average annual p/e in past decade has been above 14x. In other words, imo, plenty of room for the stock to move up on a reversion-to-mean play. ...if things can stay good. |
