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Gold/Mining/Energy : Strictly: Drilling and oil-field services
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To: SJS who wrote (1681)9/26/1997 12:27:00 PM
From: carl   of 95453
 
Steve - I have been in the stock for some time :>) and it has run ahead of the sector and I suppose could be considered overvalued.
On the other hand, First Call shows them growing 74% next year (after 89% this year) so it seems a higher PE is justified, as most other drillers growth next year is not this great.
Add to that the fact that 2 weeks ago their growth was projected to be 64% (they picked up 7 more working rigs in Sept) and you see that they can bump earnings quickly. I believe they now have about 88/89 rigs. They have stated that their goal is to be an industry consolidator of land-based rigs, so expect more acquisitions.
UTI has 4.4MM shares prior to the 3 for 1 split, so now are in the 13MM share range. This is not alot of shares to be leveraging earnings across. P Engr, guru of drillers on the Fool, earlier in the year predicted that in 2/3 years UTI, as well as NBR (and I assume PTEN) , will be making a $1MM/yr /per rig in income. Here's the excerpt -
"UTI----81 rigs (will probably have more!) = $81 mill./ 4.4million = $18.41/share
(excludes pump truck division's contribution)
Objective = $276 - $368/share" (see post #1002 on this thread for entire P Engr prediction)
His price objective is based on a 15 to 20 PE, which drillers supposedly received during the last boom. These price targets have been adjusted by him recently due to the split to $92 to $122 a share, again in 2 to 3 years. He has been "on" UTI for many months and I think he knows this industry as well as anyone. See some of my previous posts. So at $37 or so now, UTI looks OK to me. I can wait 2 -
3 years for a triple (assuming he is right!).
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