Each Tuesday we will do a detailed analysis of one of the companies in our valuation database. This week’s featured company is Baker Hughes Inc (BHI).
Company Profile (obtained from Google Finance): Baker Hughes Incorporated (Baker Hughes) is engaged in the oilfield services industry. The Company is a supplier of wellbore related products and technology services, including products and services for drilling, formation evaluation, completion and production and reservoir technology and consulting to the worldwide oil and natural gas industry. The Company operates through two segments: the Drilling and Evaluation segment, and the Completion and Production segment. In April 2008, the Company acquired two reservoir consulting firms, Gaffney, Cline & Associates (GCA) and GeoMechanics International (GMI).
Business and Management Review
1) Is the business simple and understandable?
Baker Hughes is in the business of drilling and developing technologies for resource acquisition.Â The basic business plan is simple – assist in the discovery of resources, evaluate the possibilities of getting the resources out of the earth, and develop products and services to achieve the removal of the resources.Â The company’s prime business is the supply of technologies to the oilfield industry.
2) Does the business have a consistent operating history?
The company has developed into a larger and larger supplier, but over the years it has remained true to the basic business plan outlined above.Â Financially, the company has achieved a positive net income for over 10 years, and has displayed growth potential overall (the company has been affected by the cyclical nature of natural resources).
3) Does the company have favorable long term prospects?
I believe the natural resource industry has very favorable long-term prospects, and Baker Hughes will be a strong player in the market of supplying technology.Â The demand for oil is likely to go up for a considerable amount of time and as a result there will be a strong demand for the extraction of oil from the earth.
4) Is management rational?
We believe the management of Baker Hughes has remained focused to the long-term strategies and goals of the company and is pursuing rational opportunities worldwide.
5) Is management candid with its shareholders?
Baker Hughes has an extensive investor relations page, and it appears the management is candid with its shareholders.
Data of Interest
Our Valuation: You can view our quantitative valuation following Benjamin Graham’s formula and guidelines from The Intelligent Investor on this page: Baker Hughes Inc (BHI) Valuation