Company Profile (excerpt from Reuters): Superior Energy Services, Inc., incorporated on April 26, 1991, provides a range of services and products to the energy industry related to the exploration, development and production of oil and natural gas. The Company’s segments include Drilling Products and Services; Onshore Completion and Workover Services; Production Services, and Technical Solutions. The Drilling Products and Services segment rents and sells bottom hole assemblies, drill pipe, tubulars and specialized equipment for use with onshore and offshore oil and gas well drilling, completion, production and workover activities. It also provides on-site accommodations and machining services. The Onshore Completion and Workover Services segment provides pressure pumping services used to complete and stimulate production in new oil and gas wells, fluid handling services and well servicing rigs that provide a range of well completion, workover and maintenance services. The Production Services segment provides intervention services, such as coiled tubing, cased hole and mechanical wireline, hydraulic workover and snubbing, production testing and optimization, and remedial pumping services. The Technical Solutions segment provides services typically requiring specialized engineering, manufacturing or project planning, including well containment systems, stimulation and sand control services and well plug and abandonment services. It also includes production handling arrangements and the production and sale of oil and gas.
Downloadable PDF version of this valuation:
Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?
|Defensive Investor; must pass 6 out of the following 7 tests.|
|1. Adequate Size of the Enterprise||Market Cap > $2Bil||$1,511,280,681||Fail|
|2. Sufficiently Strong Financial Condition||Current Ratio > 2||1.97||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||-656.76%||Fail|
|6. Moderate PEmg Ratio||PEmg < 20||-2.76||Fail|
|7. Moderate Price to Assets||PB Ratio < 2.5 OR PB*PEmg < 50||1.38||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||1.97||Pass|
|2. Sufficiently Strong Financial Condition||Debt to NCA < 1.1||3.42||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
|MG Growth Estimate||-4.25%|
|MG Value based on 3% Growth||-$49.45|
|MG Value based on 0% Growth||-$28.99|
|Market Implied Growth Rate||-5.63%|
|% of Intrinsic Value||N/A|
Superior Energy Services, Inc. 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, 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, 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 $1.15 in 2014 to an estimated $-3.41 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 Superior Energy Services, 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 -2.76, which was below the industry average of 59.52, 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 $-7.82.
Superior Energy Services, 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)||-$7.82|
|Number of Consecutive Years of Dividend Growth||0|
|ModernGraham tagged articles||Morningstar|
|Google Finance||MSN Money|
|Yahoo Finance||Seeking Alpha|
Most Recent Balance Sheet Figures
|Balance Sheet Information||6/1/2018|
|Total Current Assets||$762,448,000|
|Total Current Liabilities||$387,946,000|
|Shares Outstanding (Diluted Average)||154,278,000|
Earnings Per Share History
|Next Fiscal Year Estimate||-$1.04|
Earnings Per Share – ModernGraham History
|Next Fiscal Year Estimate||-$3.41|
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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.