Why Halliburton Could Catch a Bounce
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The first two post-election trading days have not been kind to investors, as the markets have sold off 3% to 4% across the board. Energy and energy-services stocks have taken slightly bigger hits on concerns about increasing regulations as well as a falling oil price. I believe the first part of these worries is somewhat overblown, and I would look for oil prices to stabilize in the coming weeks as well. The simple fact is that President Obama needs the energy sector to succeed if he is going to get any traction in improving the anemic rate of job growth that persisted throughout his first term.
- Analysts certainly are positive on the company's longer-term prospects. The median analyst price target held by the 25 analysts who cover the stock is $44 a share. The low target among these analysts is $38 a share.
- The stock is selling near the bottom of its five-year valuation range, on the basis of price-to-sales, price-to-earnings, price-to-book and price-to-cash-flow.
- The company consistently gets a 15% to 20% return on invested capital (ROIC) and is selling for less than 10x forward earnings, a discount to its five-year average of 14.2x.
- Halliburton is selling near the bottom of the trading range it has been stuck in for a year and appears to have good technical support at just under the current price.
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