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Gold/Mining/Energy : Strictly: Drilling and oil-field services
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To: John Carpenter who wrote (35271)1/17/1999 1:57:00 PM
From: Wallace Rivers  Read Replies (1) of 95453
 
I'll beg to differ, given this simple analysis from Value Line 1989 through 1998. I've read your next post, and the scenario you present may happen, and is just as likely not to happen.
SLB traded at, on average 2.96 book at lowest trade price in that time period. 2.96 X SLB BV of 15.50 (this is using lowest estimates) in '99 gives low projection of 40.30. Didn't run highest trade prices, but cursory glance gives that a number quite a bit north of 4 X BV. 4.25 X 15.5 = 65.88
Using earnings, the downside risk is not as limited, nor does it come close to the lows you mentioned. Per VL, average SLB PE ratio from 1982-1997 (that includes a period from '82-'86 when SLB never carried a PE higher than 13.3, and a nil PE in '86) was 19.5. Low estimate for '99 of $1.50 X 19.5 = 29.25. Consensus estimate of $2.14 x 19.5 = 41.73.
I'm not at all implying that SLB will trade at $200 anytime soon, I'm merely saying IMHO that I do think that there IS more return than risk potential.
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