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Range Resources Corp Valuation – May 2018 $RRC

Company Profile (excerpt from Reuters): Range Resources Corporation, incorporated on March 26, 1980, is an independent natural gas, natural gas liquids (NGLs) and oil company. The Company is engaged in the exploration and production of natural gas, NGLs and oil in the United States. The Company is engaged in the exploration, development and acquisition of natural gas and crude oil properties located primarily in the Appalachian and North Louisiana regions of the United States. Its principal areas of operation are the Marcellus Shale of Pennsylvania and the Lower Cotton Valley formation of North Louisiana. Its properties consist of interests in developed and undeveloped natural gas and oil leases.

RRC Chart

RRC data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of RRC – May 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $3,483,144,462 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.50 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -32.24% Fail
6. Moderate PEmg Ratio PEmg < 20 -35.35 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.58 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.50 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -11.97 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg -$0.39
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth -$5.59
MG Value based on 0% Growth -$3.28
Market Implied Growth Rate -21.92%
Current Price $13.62
% of Intrinsic Value N/A

Range Resources Corp. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.41 in 2014 to an estimated $-0.39 for 2018. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Range Resources Corp. revealed the company was trading below its Graham Number of $14.11. The company pays a dividend of $0.08 per share, for a yield of 0.6% Its PEmg (price over earnings per share – ModernGraham) was -35.35, which was below the industry average of 97.7, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-22.54.

Range Resources Corp. receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$22.54
Graham Number $14.11
PEmg -35.35
Current Ratio 0.50
PB Ratio 0.58
Current Dividend $0.08
Dividend Yield 0.59%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $337,947,000
Total Current Liabilities $678,846,000
Long-Term Debt $4,081,694,000
Total Assets $11,730,168,000
Intangible Assets $1,641,197,000
Total Liabilities $5,895,576,000
Shares Outstanding (Diluted Average) 246,594,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.38
Dec2017 $1.34
Dec2016 -$2.75
Dec2015 -$4.29
Dec2014 $3.79
Dec2013 $0.70
Dec2012 $0.08
Dec2011 $0.36
Dec2010 -$1.53
Dec2009 -$0.35
Dec2008 $2.25
Dec2007 $1.54
Dec2006 $1.14
Dec2005 $0.85
Dec2004 $0.38
Dec2003 $0.41
Dec2002 $0.32
Dec2001 $0.24
Dec2000 $0.64
Dec1999 -$0.18
Dec1998 -$4.55

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$0.39
Dec2017 -$0.59
Dec2016 -$1.20
Dec2015 -$0.24
Dec2014 $1.41
Dec2013 $0.10
Dec2012 -$0.08
Dec2011 $0.04
Dec2010 $0.13
Dec2009 $1.00
Dec2008 $1.53
Dec2007 $1.07
Dec2006 $0.76
Dec2005 $0.53
Dec2004 $0.37
Dec2003 $0.34
Dec2002 -$0.03

Recommended Reading:

Other ModernGraham posts about the company

Range Resources Corp Valuation – January 2017 $RRC
Range Resources Corporation Analysis – August 2015 Update $RRC
19 Companies to Research This Week – 8/23/14
Range Resources Corporation Annual Valuation – 2014 $RRC

Other ModernGraham posts about related companies

Phillips 66 Valuation – April 2018 $PSX
Baker Hughes, a GE Co Valuation – April 2018 $BHGE
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EOG Resources Inc Valuation – April 2018 $EOG
ConocoPhillips Valuation – April 2018 $COP
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Marathon Oil Corp Valuation – March 2018 $MRO

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Range Resources Corp Valuation – January 2017 $RRC

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – December 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Range Resources Corp (RRC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Range Resources Corporation is an independent natural gas, natural gas liquids (NGLs) and oil company. The Company operates through the exploration and production of natural gas, NGLs and oil in the United States segment. The Company is engaged in the exploration, development and acquisition of natural gas and oil properties, focused in the Appalachian region of the United States. The Company’s natural gas and oil operations are concentrated in the Appalachian region of the United States, primarily in the Marcellus Shale in Pennsylvania. Its reserves also include the Utica/Point Pleasant, Medina and Upper Devonian formations, which principally produce at depths ranging from 3,500 feet to 11,500 feet. Its other operations include drilling, production and field operations in the Texas Panhandle, as well as in the Anadarko Basin of western Oklahoma, the Nemaha Uplift of Northern Oklahoma and Kansas, the Permian Basin of West Texas and Mississippi.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of RRC – January 2017

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $8,467,203,748 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.82 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -179.94% Fail
6. Moderate PEmg Ratio PEmg < 20 -33.00 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.13 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.82 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -46.15 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

Stage 2: Determination of Intrinsic Value

EPSmg -$1.04
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$15.04
MG Value based on 0% Growth -$8.82
Market Implied Growth Rate -20.75%
Current Price $34.23
% of Intrinsic Value N/A

Range Resources Corp. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $-0.08 in 2012 to an estimated $-1.04 for 2016. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Range Resources Corp. revealed the company was trading above its Graham Number of $0. The company pays a dividend of $0.1 per share, for a yield of 0.3% Its PEmg (price over earnings per share – ModernGraham) was -33, which was below the industry average of 69.19, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-30.37.

Range Resources Corp. scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$30.37
Graham Number $0.00
PEmg -33.00
Current Ratio 0.82
PB Ratio 1.13
Current Dividend $0.10
Dividend Yield 0.29%
Number of Consecutive Years of Dividend Growth 0

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Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2016
Total Current Assets $379,210,000
Total Current Liabilities $462,134,000
Long-Term Debt $3,826,709,000
Total Assets $11,327,259,000
Intangible Assets $1,630,981,000
Total Liabilities $5,866,446,000
Shares Outstanding (Diluted Average) 180,683,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$2.25
Dec2015 -$4.29
Dec2014 $3.79
Dec2013 $0.70
Dec2012 $0.08
Dec2011 $0.36
Dec2010 -$1.52
Dec2009 -$0.35
Dec2008 $2.25
Dec2007 $1.54
Dec2006 $1.14
Dec2005 $0.85
Dec2004 $0.38
Dec2003 $0.41
Dec2002 $0.32
Dec2001 $0.24
Dec2000 $0.64
Dec1999 -$0.18
Dec1998 -$4.55
Dec1997 -$0.87
Dec1996 $0.46

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$1.04
Dec2015 -$0.24
Dec2014 $1.41
Dec2013 $0.10
Dec2012 -$0.08
Dec2011 $0.05
Dec2010 $0.13
Dec2009 $1.00
Dec2008 $1.53
Dec2007 $1.07
Dec2006 $0.76
Dec2005 $0.53
Dec2004 $0.37
Dec2003 $0.34
Dec2002 -$0.03
Dec2001 -$0.45
Dec2000 -$0.83

Recommended Reading:

Other ModernGraham posts about the company

Range Resources Corporation Analysis – August 2015 Update $RRC
19 Companies to Research This Week – 8/23/14
Range Resources Corporation Annual Valuation – 2014 $RRC

Other ModernGraham posts about related companies

CIRCOR International Inc Valuation – Initial Coverage $CIR
National-Oilwell Varco Valuation – December 2016 $NOV
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Newfield Exploration Co Valuation – December 2016 $NFX
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Imperial Oil Limited Valuation – Initial Coverage $IMO
Phillips 66 Valuation – August 2016 $PSX
FMC Technologies Inc Valuation – August 2016 $FTI

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Range Resources Corporation Analysis – August 2015 Update $RRC

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – August 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Range Resources Corporation (RRC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Range Resources Corporation (Range) is an independent natural gas, natural gas liquids (NGLs) and oil company. The Company is engaged in the engaged in the exploration, development and acquisition of natural gas and oil properties, mostly in the Appalachian and Midcontinent regions of the United States. The Company’s properties consist of interests in developed and undeveloped natural gas and oil leases in these regions. These interests are mostly in the form of working interests and, to a lesser extent, royalty and overriding royalty interests. The Company’s activities in the Midcontinent region include drilling, production and field operations in the Texas Panhandle, as well as in the Anadarko Basin of western Oklahoma, the Nemaha Uplift of northern Oklahoma and Kansas, the Permian Basin of West Texas and Mississippi.

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To read the rest of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of RRC – August 2015

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end Fail
6. Moderate PEmg Ratio PEmg < 20 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 Pass
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg 0.94
MG Growth Estimate 15.00%
MG Value $36.27
Opinion Fairly Valued
MG Value based on 3% Growth $13.66
MG Value based on 0% Growth $8.01
Market Implied Growth Rate 15.11%
Current Price $36.47
% of Intrinsic Value 100.56%

Range Resources Corporation is not suitable for the more conservative Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the high PEmg ratio.  The Enterprising Investor is concerned by the level of debt relative to the current assets, and the lack of earnings stability over the last five years.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities or proceed with a cautious speculative attitude.

As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $0.04 in 2011 to an estimated $0.94 for 2015.  This level of demonstrated earnings supports the market’s implied estimate of 15.11% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Range Resources Corporation (RRC)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

RRC charts August 2015

Net Current Asset Value (NCAV) -$30.35
PEmg 38.68
Current Ratio 0.74
PB Ratio 1.79
Dividend Yield 0.44%
Number of Consecutive Years of Dividend Growth 0

 

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Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Total Current Assets $373,608,000
Total Current Liabilities $506,752,000
Long-Term Debt $3,464,000,000
Total Assets $8,805,931,000
Intangible Assets $0
Total Liabilities $5,424,517,000
Shares Outstanding (Diluted Average) 166,421,000

Earnings Per Share History

Next Fiscal Year Estimate -$0.73
Dec14 $3.79
Dec13 $0.70
Dec12 $0.08
Dec11 $0.36
Dec10 -$1.53
Dec09 -$0.35
Dec08 $2.25
Dec07 $1.54
Dec06 $1.14
Dec05 $0.85
Dec04 $0.38
Dec03 $0.41
Dec02 $0.32
Dec01 $0.24
Dec00 $0.64
Dec99 -$0.18
Dec98 -$4.55
Dec97 -$0.87
Dec96 $0.46
Dec95 $0.21

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $0.94
Dec14 $1.41
Dec13 $0.10
Dec12 -$0.08
Dec11 $0.04
Dec10 $0.13
Dec09 $1.00
Dec08 $1.53
Dec07 $1.07
Dec06 $0.76
Dec05 $0.53
Dec04 $0.37
Dec03 $0.34
Dec02 -$0.03
Dec01 -$0.45
Dec00 -$0.83
Dec99 -$1.37

Recommended Reading:

Other ModernGraham posts about the company

19 Companies to Research This Week – 8/23/14
Range Resources Corporation Annual Valuation – 2014 $RRC

Other ModernGraham posts about related companies

Helmerich & Payne Inc. Analysis – August 2015 Update $HP
FMC Technologies Inc. Analysis – August 2015 Update $FTI
Denbury Resources Inc. Analysis – August 2015 Update $DNR
Western Refining Inc. Analysis – Initial Coverage $WNR
WPX Energy Inc. Analysis – 2015 Update $WPX
Marathon Petroleum Corporation Analysis – 2015 Update $MPC
Valero Energy Corporation Analysis – July 2015 Update $VLO
National Oilwell Varco Analysis – July 2015 Update $NOV
Magellan Midstream Partners LP Analysis – Initial Coverage $MMP
Schlumberger Limited Analysis – July 2015 Update $SLB

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  This is not investment advice and all readers should speak with a registered investment adviser prior to making any investment decision.  ModernGraham is not affiliated with the company in any manner.

Range Resources Corporation Annual Valuation – 2014 $RRC

220px-Range_logo.svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Undervalued Companies for the Defensive Investor.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Range Resources Corp (RRC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Range Resources Corporation (Range) is an independent natural gas, natural gas liquids and oil company, engaged in the exploration, development and acquisition of natural gas and oil properties, mostly in the Appalachian and Southwestern regions of the United States. Range operates in two regions: the Appalachian (which includes shale tight gas, coal bed methane and conventional natural gas, natural gas liquids, condensate and oil production in Pennsylvania, Virginia, and West Virginia), and Southwestern (which includes the Permian Basin of West Texas and the Delaware Basin of New Mexico, the Texas Panhandle, the Ardmore Basin in Southern Oklahoma, the Nemaha Uplift in Northern Oklahoma and the Anadarko Basin of Western Oklahoma). As of Decmbeer 31, 2011, the Company has approximately 8,600 proven and unproven drilling locations in inventory. During the year ended December 31, 2011, the Company discontinued its Barnett Shale assets that were sold in April 2011.
RRC Chart

RRC data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 2/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 2/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – FAIL
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – FAIL
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $75.93
MG Value $25.10
MG Opinion Overvalued
Value Based on 3% Growth $9.45
Value Based on 0% Growth $5.54
Market Implied Growth Rate 53.98%
Net Current Asset Value (NCAV) -$26.88
PEmg 116.46
Current Ratio 0.44
PB Ratio 4.24

Balance Sheet – 6/30/2014

Current Assets $247,600,000
Current Liabilities $558,900,000
Total Debt $2,830,000,000
Total Assets $7,800,600,000
Intangible Assets $0
Total Liabilities $4,780,400,000
Outstanding Shares 168,610,000

Earnings Per Share

2014 (estimate) $1.55
2013 $0.70
2012 $0.08
2011 $0.26
2010 -$1.53
2009 -$0.35
2008 $2.22
2007 $1.11
2006 $1.42
2005 $0.86
2004 $0.38

Earnings Per Share – ModernGraham

2014 (estimate) $0.65
2013 $0.08
2012 -$0.11
2011 -$0.02
2010 $0.08
2009 $0.94

Dividend History
RRC Dividend Chart

RRC Dividend data by YCharts

Conclusion:

Range Resources Corporation is not suitable for either the Defensive Investor or the Enterprising Investor.  The only Defensive Investor requirements the company satisfies are the market cap size and the dividend history.  Likewise, the only Enterprising Investor requirements the company passes are the dividend payment and the earnings growth over the last five years.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities at this time.  From a valuation standpoint, the company appears overvalued after growing its EPSmg (normalized earnings) from $0.08 in 2010 to an estimated $0.65 for 2014.  This level of demonstrated growth falls short of the market’s extremely high implied estimate of 53.98% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value well below the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Range Resources Corporation (RRC)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Range Resources Corporation (RRC) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Noble Corp PLC Valuation – June 2018 $NE

Company Profile (excerpt from Reuters): Noble Corporation plc, incorporated on January 10, 2013, is an offshore drilling contractor for the oil and gas industry. The Company performs contract drilling services with its global fleet of mobile offshore drilling units. As of December 31, 2016, the Company’s fleet of 28 drilling rigs consisted of 14 jackups, eight drillships and six semisubmersibles. The Company typically employs each drilling unit under an individual contract. The Company’s drillships are self-propelled vessels. These units maintain their position over the well through the use of a computer-controlled dynamic positioning system. As of December 31, 2016, the Company’s drillship fleet consisted of four dynamically positioned Gusto Engineering Class drillships; two dynamically positioned Bully-class drillships, and two dynamically positioned Globetrotter-class drillships.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of NE – June 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $1,446,135,000 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.45 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -174.22% Fail
6. Moderate PEmg Ratio PEmg < 20 -3.58 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.28 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.45 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 9.02 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg -$1.77
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$25.67
MG Value based on 0% Growth -$15.05
Market Implied Growth Rate -6.04%
Current Price $6.33
% of Intrinsic Value N/A

Noble Corporation PLC does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings stability or growth over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.63 in 2014 to an estimated $-1.77 for 2018. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Noble Corporation PLC revealed the company was trading above its Graham Number of $0. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was -3.58, which was below the industry average of 87.76, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-15.8.

Noble Corporation PLC scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$15.80
Graham Number $0.00
PEmg -3.58
Current Ratio 2.45
PB Ratio 0.28
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $720,460,000
Total Current Liabilities $294,450,000
Long-Term Debt $3,841,350,000
Total Assets $10,268,123,000
Intangible Assets $0
Total Liabilities $4,609,338,000
Shares Outstanding (Diluted Average) 246,175,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$2.16
Dec2017 -$2.11
Dec2016 -$3.82
Dec2015 $2.06
Dec2014 $0.03
Dec2013 $3.05
Dec2012 $2.05
Dec2011 $1.46
Dec2010 $3.02
Dec2009 $6.42
Dec2008 $5.81
Dec2007 $4.48
Dec2006 $2.67
Dec2005 $1.08
Dec2004 $0.55
Dec2003 $0.63
Dec2002 $0.79
Dec2001 $0.98
Dec2000 $0.61
Dec1999 $0.32
Dec1998 $0.62

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$1.77
Dec2017 -$1.10
Dec2016 -$0.17
Dec2015 $1.68
Dec2014 $1.63
Dec2013 $2.69
Dec2012 $2.92
Dec2011 $3.65
Dec2010 $4.66
Dec2009 $5.01
Dec2008 $3.84
Dec2007 $2.53
Dec2006 $1.42
Dec2005 $0.80
Dec2004 $0.68
Dec2003 $0.72
Dec2002 $0.73

Recommended Reading:

Other ModernGraham posts about the company

Noble Corp PLC Valuation – July 2016 $NE
Noble Corporation Annual Valuation – 2015 $NE
16 Companies in the Spotlight this Week – 4/19/14
Noble Corporation plc (NE) Annual Valuation – 2014

Other ModernGraham posts about related companies

Cabot Oil & Gas Corp Valuation – June 2018 $COG
Concho Resources Inc Valuation – June 2018 $CXO
Vlaero Energy Corp Valuation – June 2018 $VLO
Occidental Petroleum Corp Valuation – June 2018 $OXY
Andeavor Valuation – May 2018 $ANDV
Halliburton Co Valuation – May 2018 $HAL
National Oilwell Varco Inc Valuation – May 2018 $NOV
Newfield Exploration Co Valuation – May 2018 $NFX
Kinder Morgan Inc Valuation – May 2018 $KMI
Range Resources Corp Valuation – May 2018 $RRC

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Rowan Companies PLC Valuation – June 2018 $RDC

Company Profile (excerpt from Reuters): Rowan Companies plc, incorporated on October 11, 2011, is a provider of offshore contract drilling services to the international oil and gas industry. The Company operates through two segments: deepwater and jack-ups. Its deepwater segment consists of drillship operations. As of December 31, 2016, the Company’s fleet consisted of 29 mobile offshore drilling units, including 25 self-elevating jack-up rigs and four ultra-deepwater drillships. The Company’s fleet operates across the world, including the United States Gulf of Mexico (US GOM), the United Kingdom and Norwegian sectors of the North Sea, the Middle East and Trinidad. Rowan Companies Inc. is the subsidiary of the Company.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of RDC – June 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

 

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $2,078,905,926 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 6.03 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -111.37% Fail
6. Moderate PEmg Ratio PEmg < 20 -20.97 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.39 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 6.03 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.10 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg -$0.77
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$11.21
MG Value based on 0% Growth -$6.57
Market Implied Growth Rate -14.74%
Current Price $16.22
% of Intrinsic Value N/A

Rowan Companies PLC does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings stability or growth over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.46 in 2014 to an estimated $-0.77 for 2018. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Rowan Companies PLC revealed the company was trading above its Graham Number of $0. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was -20.97, which was below the industry average of 87.76, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-12.75.

Rowan Companies PLC scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$12.75
Graham Number $0.00
PEmg -20.97
Current Ratio 6.03
PB Ratio 0.39
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

 

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $1,432,200,000
Total Current Liabilities $237,500,000
Long-Term Debt $2,510,500,000
Total Assets $8,328,000,000
Intangible Assets $0
Total Liabilities $3,044,800,000
Shares Outstanding (Diluted Average) 126,500,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$4.42
Dec2017 $0.57
Dec2016 $2.55
Dec2015 $0.75
Dec2014 -$0.93
Dec2013 $2.03
Dec2012 $1.46
Dec2011 $5.83
Dec2010 $2.36
Dec2009 $3.24
Dec2008 $3.77
Dec2007 $4.31
Dec2006 $2.85
Dec2005 $2.08
Dec2004 -$0.01
Dec2003 -$0.08
Dec2002 $0.90
Dec2001 $0.80
Dec2000 $0.74
Dec1999 -$0.12
Dec1998 $1.43

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$0.77
Dec2017 $1.03
Dec2016 $1.23
Dec2015 $0.99
Dec2014 $1.46
Dec2013 $2.76
Dec2012 $3.20
Dec2011 $4.01
Dec2010 $3.17
Dec2009 $3.47
Dec2008 $3.25
Dec2007 $2.61
Dec2006 $1.55
Dec2005 $0.85
Dec2004 $0.31
Dec2003 $0.46
Dec2002 $0.74

Recommended Reading:

Other ModernGraham posts about the company

Rowan Companies PLC Valuation – July 2016 $RDC
27 Companies in the Spotlight This Week – 4/4/15
Rowan Companies plc Annual Valuation – 2015 $RDC
17 Companies in the Spotlight This Week – 3/29/14
Rowan Companies (RDC) Annual Valuation – 2014

Other ModernGraham posts about related companies

Cabot Oil & Gas Corp Valuation – June 2018 $COG
Concho Resources Inc Valuation – June 2018 $CXO
Vlaero Energy Corp Valuation – June 2018 $VLO
Occidental Petroleum Corp Valuation – June 2018 $OXY
Andeavor Valuation – May 2018 $ANDV
Halliburton Co Valuation – May 2018 $HAL
National Oilwell Varco Inc Valuation – May 2018 $NOV
Newfield Exploration Co Valuation – May 2018 $NFX
Kinder Morgan Inc Valuation – May 2018 $KMI
Range Resources Corp Valuation – May 2018 $RRC

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Diamond Offshore Drilling Inc Valuation – June 2018 $DO

Company Profile (excerpt from Reuters): Diamond Offshore Drilling, Inc., incorporated on April 12, 1989, provides contract drilling services to the energy industry. As of December 31, 2016, the Company had a fleet of 24 offshore drilling rigs. As of December 31, 2016, its fleet consisted of four drillships, 19 semisubmersible rigs and one jack-up rig. Its fleet enables it to offer a range of services, primarily in the floater market, including ultra-deepwater, deepwater and mid-water. The principal markets for its offshore contract drilling services are the Gulf of Mexico, including the United States and Mexico; South America, principally offshore Brazil, and Trinidad and Tobago; Australia and Southeast Asia, including Malaysia, Indonesia and Vietnam; Europe, principally offshore the United Kingdom and Norway; East and West Africa; the Mediterranean, and the Middle East. The Company provides offshore drilling services to a customer base that includes independent oil and gas companies, and government-owned oil companies.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of DO – June 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $2,938,364,489 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 4.51 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -115.58% Fail
6. Moderate PEmg Ratio PEmg < 20 -21.84 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.76 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 4.51 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.88 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg -$0.96
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$13.85
MG Value based on 0% Growth -$8.12
Market Implied Growth Rate -15.17%
Current Price $20.86
% of Intrinsic Value N/A

Diamond Offshore Drilling Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings stability or growth over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $4.41 in 2014 to an estimated $-0.96 for 2018. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Diamond Offshore Drilling Inc revealed the company was trading above its Graham Number of $0. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was -21.84, which was below the industry average of 87.76, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-11.15.

Diamond Offshore Drilling Inc scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$11.15
Graham Number $0.00
PEmg -21.84
Current Ratio 4.51
PB Ratio 0.76
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $879,969,000
Total Current Liabilities $195,026,000
Long-Term Debt $1,972,638,000
Total Assets $6,193,083,000
Intangible Assets $0
Total Liabilities $2,413,451,000
Shares Outstanding (Diluted Average) 137,495,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$1.10
Dec2017 $0.13
Dec2016 -$2.72
Dec2015 -$2.00
Dec2014 $2.81
Dec2013 $3.95
Dec2012 $5.18
Dec2011 $6.92
Dec2010 $6.87
Dec2009 $9.89
Dec2008 $9.42
Dec2007 $6.12
Dec2006 $5.12
Dec2005 $1.91
Dec2004 -$0.06
Dec2003 -$0.37
Dec2002 $0.47
Dec2001 $1.26
Dec2000 $0.53
Dec1999 $1.11
Dec1998 $2.66

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$0.96
Dec2017 -$0.44
Dec2016 -$0.01
Dec2015 $2.02
Dec2014 $4.41
Dec2013 $5.66
Dec2012 $6.89
Dec2011 $7.78
Dec2010 $7.97
Dec2009 $7.84
Dec2008 $6.05
Dec2007 $3.75
Dec2006 $2.19
Dec2005 $0.69
Dec2004 $0.18
Dec2003 $0.40
Dec2002 $0.92

Recommended Reading:

Other ModernGraham posts about the company

5 Speculative and Overvalued Companies to Avoid – July 2016
Diamond Offshore Drilling Inc Valuation – July 2016 $DO
28 Companies in the Spotlight This Week – 2/28/15
Diamond Offshore Drilling Inc. Annual Valuation – 2015 $DO
22 Companies in the Spotlight This Week – 11/29/14

Other ModernGraham posts about related companies

Cabot Oil & Gas Corp Valuation – June 2018 $COG
Concho Resources Inc Valuation – June 2018 $CXO
Vlaero Energy Corp Valuation – June 2018 $VLO
Occidental Petroleum Corp Valuation – June 2018 $OXY
Andeavor Valuation – May 2018 $ANDV
Halliburton Co Valuation – May 2018 $HAL
National Oilwell Varco Inc Valuation – May 2018 $NOV
Newfield Exploration Co Valuation – May 2018 $NFX
Kinder Morgan Inc Valuation – May 2018 $KMI
Range Resources Corp Valuation – May 2018 $RRC

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Transocean Ltd Valuation – June 2018 $RIG

Company Profile (excerpt from Reuters): Transocean Ltd., incorporated on August 18, 2008, is an international provider of offshore contract drilling services for oil and gas wells. The Company’s primary business is to contract its drilling rigs, related equipment and work crews on a dayrate basis to drill oil and gas wells. As of February 9, 2017, the Company owned or had partial ownership interests in and operated 56 mobile offshore drilling units. As of February 9, 2017, its fleet consisted of 30 floaters, seven harsh environment floaters, three deepwater floaters, six midwater floaters and 10 high-specification jackups. As February 9, 2017, it also had four ultra-deepwater drillships and five high-specification jackups under construction or under contract to be constructed. Its contract drilling services operations are spread across oil and gas exploration and development areas throughout the world. Its fleet operates in a single, global market for the provision of contract drilling services.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of RIG – June 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $6,157,982,137 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.50 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 41.86% Pass
6. Moderate PEmg Ratio PEmg < 20 -6.09 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.44 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.50 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 5.24 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg -$2.21
MG Growth Estimate 3.88%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$32.02
MG Value based on 0% Growth -$18.77
Market Implied Growth Rate -7.29%
Current Price $13.44
% of Intrinsic Value N/A

Transocean LTD does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings stability over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $-2.98 in 2014 to an estimated $-2.21 for 2018. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Transocean LTD revealed the company was trading above its Graham Number of $0. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was -6.09, which was below the industry average of 87.76, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-17.64.

Transocean LTD scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$17.64
Graham Number $0.00
PEmg -6.09
Current Ratio 1.50
PB Ratio 0.44
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $4,543,000,000
Total Current Liabilities $3,022,000,000
Long-Term Debt $7,976,000,000
Total Assets $25,695,000,000
Intangible Assets $1,073,000,000
Total Liabilities $12,268,000,000
Shares Outstanding (Diluted Average) 438,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$1.40
Dec2017 -$8.00
Dec2016 $2.08
Dec2015 $2.36
Dec2014 -$5.08
Dec2013 $3.87
Dec2012 -$0.62
Dec2011 -$17.88
Dec2010 $2.88
Dec2009 $9.84
Dec2008 $12.53
Dec2007 $14.14
Dec2006 $6.10
Dec2005 $3.03
Dec2004 $0.67
Dec2003 $0.06
Dec2002 -$11.69
Dec2001 $0.80
Dec2000 $0.51
Dec1999 $0.53
Dec1998 $3.12

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$2.21
Dec2017 -$2.06
Dec2016 $0.78
Dec2015 -$1.07
Dec2014 -$2.98
Dec2013 -$1.41
Dec2012 -$2.25
Dec2011 -$0.61
Dec2010 $8.38
Dec2009 $10.46
Dec2008 $9.62
Dec2007 $7.04
Dec2006 $2.20
Dec2005 -$0.30
Dec2004 -$1.96
Dec2003 -$2.83
Dec2002 -$3.30

Recommended Reading:

Other ModernGraham posts about the company

Transocean Ltd Valuation – July 2016 $RIG
47 Companies in the Spotlight This Week – 5/16/15
Transocean Limited Annual Valuation – 2015 $RIG
16 Companies in the Spotlight This Week – 5/24/14
Transocean Ltd. (RIG) Annual Valuation – 2014

Other ModernGraham posts about related companies

Cabot Oil & Gas Corp Valuation – June 2018 $COG
Concho Resources Inc Valuation – June 2018 $CXO
Vlaero Energy Corp Valuation – June 2018 $VLO
Occidental Petroleum Corp Valuation – June 2018 $OXY
Andeavor Valuation – May 2018 $ANDV
Halliburton Co Valuation – May 2018 $HAL
National Oilwell Varco Inc Valuation – May 2018 $NOV
Newfield Exploration Co Valuation – May 2018 $NFX
Kinder Morgan Inc Valuation – May 2018 $KMI
Range Resources Corp Valuation – May 2018 $RRC

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Nabors Industries Ltd Valuation – June 2018 $NBR

Company Profile (excerpt from Reuters): Nabors Industries Ltd., incorporated on December 11, 2001, owns and operates a land-based drilling rig fleet. The Company is a provider of offshore platform drilling rigs in the United States and multiple international markets. The Company conducts its Drilling & Rig Services business through four segments: U.S. Drilling, Canada Drilling, International Drilling and Rig Services. The Company provides wellbore placement services, drilling software and performance tools, drilling equipment and various technologies throughout the oil and gas markets. The Company’s Drilling & Rig Services business comprises land-based and offshore drilling rig operations and other rig services, consisting of equipment manufacturing, rig instrumentation and optimization software. The Company is a provider of directional drilling and measurement while drilling (MWD) systems and services.

Downloadable PDF version of this valuation:

ModernGraham Valuation of NBR – June 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $2,273,144,196 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.95 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -884.09% Fail
6. Moderate PEmg Ratio PEmg < 20 -3.19 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.72 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.95 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 5.85 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg -$2.01
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth -$29.17
MG Value based on 0% Growth -$17.10
Market Implied Growth Rate -5.84%
Current Price $6.41
% of Intrinsic Value N/A

Nabors Industries Ltd. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $-0.39 in 2014 to an estimated $-2.01 for 2018. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Nabors Industries Ltd. revealed the company was trading above its Graham Number of $0. The company pays a dividend of $0.24 per share, for a yield of 3.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was -3.19, which was below the industry average of 87.76, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-13.18.

Nabors Industries Ltd. scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$13.18
Graham Number $0.00
PEmg -3.19
Current Ratio 1.95
PB Ratio 0.72
Current Dividend $0.24
Dividend Yield 3.74%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $1,494,373,000
Total Current Liabilities $766,828,000
Long-Term Debt $4,256,160,000
Total Assets $8,299,830,000
Intangible Assets $172,982,000
Total Liabilities $5,562,822,000
Shares Outstanding (Diluted Average) 308,788,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$1.36
Dec2017 -$1.90
Dec2016 -$3.64
Dec2015 -$1.29
Dec2014 -$2.28
Dec2013 $0.47
Dec2012 $0.56
Dec2011 $0.85
Dec2010 $0.33
Dec2009 -$0.30
Dec2008 $1.65
Dec2007 $3.25
Dec2006 $3.40
Dec2005 $2.00
Dec2004 $0.96
Dec2003 $0.62
Dec2002 $0.41
Dec2001 $1.12
Dec2000 $0.45
Dec1999 $0.10
Dec1998 $0.58

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$2.01
Dec2017 -$2.13
Dec2016 -$1.91
Dec2015 -$0.81
Dec2014 -$0.39
Dec2013 $0.50
Dec2012 $0.55
Dec2011 $0.75
Dec2010 $1.02
Dec2009 $1.58
Dec2008 $2.43
Dec2007 $2.56
Dec2006 $1.97
Dec2005 $1.18
Dec2004 $0.75
Dec2003 $0.61
Dec2002 $0.58

Recommended Reading:

Other ModernGraham posts about the company

Nabors Industries Ltd Valuation – July 2016 $NBR
28 Companies in the Spotlight This Week – 2/28/15
Nabors Industries Limited Annual Valuation – 2015 $NBR
16 Companies in the Spotlight This Week – 3/1/14
Nabors Industries (NBR) Annual Valuation

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

QEP Resources Inc Valuation – June 2018 $QEP

Company Profile (excerpt from Reuters): QEP Resources, Inc., incorporated on May 17, 2010, is an independent crude oil and natural gas exploration and production company. The Company focuses on two regions of the United States: the Northern Region (primarily in North Dakota, Wyoming and Utah) and the Southern Region (primarily in Texas and Louisiana). The Company conducts exploration and production activities in North America’s hydrocarbon resource plays. The Company has an inventory of developed and undeveloped drilling locations in the Permian Basin in western Texas, the Williston Basin in North Dakota, Haynesville/Cotton Valley in northwestern Louisiana, the Uinta Basin in eastern Utah and other properties in Wyoming, Utah and Colorado. It sells gas volumes to wholesale marketers, industrial users, local distribution companies and utilities. It sells oil and natural gas liquid (NGL) volumes to refiners, marketers and other companies. As of December 31, 2016, the Company’s estimated proved reserves were approximately 731.4 million barrels of oil equivalent (MMboe).

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of QEP – June 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $2,900,088,097 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.24 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -206.19% Fail
6. Moderate PEmg Ratio PEmg < 20 -13.31 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.80 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.24 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -5.31 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg -$0.92
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$13.36
MG Value based on 0% Growth -$7.83
Market Implied Growth Rate -10.90%
Current Price $12.26
% of Intrinsic Value N/A

QEP Resources Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability or growth over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $2.16 in 2014 to an estimated $-0.92 for 2018. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into QEP Resources Inc revealed the company was trading above its Graham Number of $0. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was -13.31, which was below the industry average of 87.76, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-15.62.

QEP Resources Inc scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$15.62
Graham Number $0.00
PEmg -13.31
Current Ratio 0.24
PB Ratio 0.80
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $149,800,000
Total Current Liabilities $613,000,000
Long-Term Debt $2,458,100,000
Total Assets $7,608,600,000
Intangible Assets $0
Total Liabilities $3,911,900,000
Shares Outstanding (Diluted Average) 240,900,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$0.82
Dec2017 $1.12
Dec2016 -$5.62
Dec2015 -$0.85
Dec2014 $4.36
Dec2013 $0.89
Dec2012 $0.72
Dec2011 $1.50
Dec2010 $1.84
Dec2009 $1.67

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate -$0.92
Dec2017 -$0.65
Dec2016 -$1.06
Dec2015 $1.25
Dec2014 $2.16
Dec2013 $1.15
Dec2012 $1.23
Dec2011 $1.32
Dec2010 $1.06
Dec2009 $0.56

Recommended Reading:

Other ModernGraham posts about the company

QEP Resources Inc Valuation – July 2016 $QEP
40 Companies in the Spotlight This Week – 2/21/15
QEP Resources Inc. Annual Valuation – 2015 $QEP
15 Companies in the Spotlight This Week – 2/8/14
QEP Resources (QEP) Annual Valuation

Other ModernGraham posts about related companies

Cabot Oil & Gas Corp Valuation – June 2018 $COG
Concho Resources Inc Valuation – June 2018 $CXO
Vlaero Energy Corp Valuation – June 2018 $VLO
Occidental Petroleum Corp Valuation – June 2018 $OXY
Andeavor Valuation – May 2018 $ANDV
Halliburton Co Valuation – May 2018 $HAL
National Oilwell Varco Inc Valuation – May 2018 $NOV
Newfield Exploration Co Valuation – May 2018 $NFX
Kinder Morgan Inc Valuation – May 2018 $KMI
Range Resources Corp Valuation – May 2018 $RRC

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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