No. of Recommendations: 1
Hi Jim,

ATW appears to have better valuation metrics on P/E, margins, growth etc. Why RIG over ATW?

Thanks,

Anurag
Print the post Back To Top
No. of Recommendations: 3
ATW appears to have better valuation metrics on P/E, margins, growth etc. Why RIG over ATW?

Hi Anurag,

Good question. The answer basically comes down to what is being expected by the market for each. I looked at the two earlier, right after the initial purchase (http://boards.fool.com/im-curious-to-know-how-your-valuation...). Looking with the latest numbers, here's the comparison:

RIG ATW
TTM FCF $2,485 $119 M (TTM to 9/30/10 for both)
# shares 319.0 64.4 M
Share price $71.29 $37.46
Discount rate 15% 15%
Expected growth 1-5 yrs 6.5% 22.7%
Expected growth 6-10 yrs* 3.3% 11.4%
Terminal growth** 0.0% 0.0% (kept the same between the two)
*While 1-5 years is varied by the Excel Solver, 6-10 years is set to half of the 1-5 years value.
**Terminal growth is usually set at 0% or 2.5%.


So, the market is expecting a whole bunch more from Atwood than from Transocean. Granted, it's now expecting more from Transocean than when I first purchased, but it's still a lot less than what it's been able to do in the past -- 6.5% first five years expected CAGR compared to 35.9% over the past five years.

For Atwood, the discrepancy isn't as large -- 22.7% first five years expected CAGR compared to 50.4% over the past five years.

Atwood is certainly a good company, it just doesn't fit with the way I'm picking companies for this portfolio. At least right now.

Cheers,
Jim
Print the post Back To Top
No. of Recommendations: 0
Jim,

I'm new to the board and am enjoying the posts and your evaluations. I am currently crunching the numbers myself on ATW and RIG. I have read your articles about RIG and it seems RIG has not taken as much of a dive as I would have expected given the gov'ts GOM lawsuit. Another external factor that will help both companies is that of the price of oil. If one believes oil is headed north of $100 in the near term, and I am one of those, I believe RIG will benefit nicely. I also believe that if the GOM permitting process becomes more efficient, deep water drilling will once again trump the shallow water since the "lower fruit has already been picked". How under valued do you believe RIG is? Thanks again for what you do.

Al
Print the post Back To Top
Advertisement