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No. of Recommendations: 1
Looks nice, but at a guess maybe people are looking at a case of classic
"cyclically ajusted earnings". Their earnings slid 38% coming off their
last cyclical peak, so maybe folks are factoring in another decline?
They have had as many years of declining cash flow as they have has rising.
Historically their market price has correlated pretty closely with 8
times current year cash flow. Of course, even that metric would put
them around 12% higher than today's price, but by itself that's not
a margin of safety.

For whatever it's worth, Value Line is forecasting a sharp and imminent
fall in rate of earnings growth, though not an absolute decline.
To the upside, they forecast a 14% book value growth rate, and a
return on equity of around 13% several years from now.

I have to say it meets a lot of my value criteria.
All the margins and ratios are nice, and holding up well with time.
Not overextended: they could pay off their debt with a year's earnings
(or with cash, for that matter).
Lots of share buybacks, probably continuing for quite a while.
It meets one of my "overlooked businesses" filters: book value growth
in the last few years has exceeded market returns by a wide margin.
Their increase in book value per share is a beautiful rising line for 17
years, almost like they were targeting that rather than steady earnings.

Good solid business--I particularly like this industry in that, though
there is a lot of political danger for oil majors in terms of who gets
an oil lease in one of those countries you don't want to live in,
by contrast the oil services companies never get the attention, and
just win on merit. They can, and do, work anywhere.

All things considered, it looks like a good business at a reasonable
price, even if they do have a couple of flat years. But the price
does not seem screamingly great based on my estimate of EBIT/EV, for
which I get 11%. That's good, but there are lots of companies even
cheaper (1392 of them in my database); it's hard to weigh that against
the positive aspects of the firm. If I forecast earnings, PE, and
market price 10 years from now, it meets my hurdle rate, but not
my "after margin of safety" hurdle rate. I'd certainly buy at $48,
possibly at $51, but it appears I'm a bit late to the party for that.

I too am interested in any help anyone might offer.

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