Newpark Resources’ superior numbers
When we think of the oil and gas services industry, we often immediately jump to the big players, like Halliburton (NYSE:HAL) and Baker Hughes (NYSE:BHI). However, overlooking an undervalued company like NR could be a mistake. Below, you can see a chart using data from Xignite that compares NR with HAL and BHI in nine key metrics:
As you can see, Newpark Resources is superior in seven of the nine metrics. The leverage ratio, P/E ratio, price to sales ratio, three-year annual income growth rate, price to cash flow, ROA, and ROE all point to NR being a potential better value.
It’s true that NR is inferior when it comes to EBITDA margin and the three-year annual revenue growth metrics, but those two categories don’t outweigh the good performance in the other seven. In fact, for value investors looking for a good deal right now, the better P/E ratio and price to cash flow, as compared to major players in the industry, as well as the ROA and ROE, are rather encouraging. NR looks especially good when held up next to BHI.
The most interest aspect is the possibility for a takeover:
Is Newpark Resources ripe for a take over?
Not only could investment in NR now result in capital appreciation later, but there is also a chance of profiting from a takeover. The numbers look good for Newpark Resources and this is important to note given the trend toward consolidation in the oil and gas services industry. If a major player is currently looking to take over a smaller company, NR is potentially the most promising choice.
In fact, if you consider that Halliburton just paid a 50 percent premium for a takeover deal to acquire Baker Hughes, it seems logical to think that another company with similar-and in some cases better-numbers could also be a takeover candidate.
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