Growing & Undervalued : Helmerich & Payne Inc.

From my watch list, let’s have a view of Helmerich & Payne Inc (HP, Financial), that looks undervalued based on the Peter Lynch Price Value and with an EBITDA that is growing year by year.

Helmerich & Payne Inc (HP)

Description : The company has a market cap of $7.97 billion and is engaged in contract drilling of oil & gas wells for others & in the ownership, development & operation of commercial real estates. Its business is composed of three reportable segments: U.S. Land, Offshore & International Land. Its U.S. Land operations drill in Oklahoma, California, Texas, Wyoming, Colorado, Louisiana, Pennsylvania, Ohio, Utah, Arkansas, New Mexico, Montana, North Dakota, West Virginia and Nevada. Offshore operations are conducted in the Gulf of Mexico, and offshore of California and Equatorial Guinea.

Ratios : HPhas a ROA of 11.15 (is ranked higher than 96% of the 193 companies in the Global Oil & Gas Drilling industry), ROC of 20.43% (ranked higher than 94% of the 193 companies in the same industry) and a ROE of 15.46 % (is ranked higher than 95% of the 193 companies in the same industry). Compared to the history of HP, 2007 was the best year for ROE when reached a maximum level of 28.10%, for ROA that reached the maximum level of 17.90% and for ROC that reached the maximum level of 32.19%.

Financials : The company has a financial strength of 6 out of 10. Cash covers debts enough, with a cash to debt ratio of 3.11. This ratio increases year by year and just 5 years back (in 2010) this ratio was 0.18. Interest coverage is 226.64, the best result the company ever had so far, and the current ratio is very high, compared with HP’s industry median of 8.27

Growth : Over the last five years, the company had a steady and strong growth rate (per share).

During the last 12 months, EPS declined by 0.6%. Revenue rose by 12.20% and EBITDA rose by 5.50. A special note has to be given to the free cash flow, that is dropping by 90.60%.

The average growth rate even compared to the last 10 years is strong and steady, the growing trend is the same of the last 5 years. This is a good sign if you are looking for a company with true value and that grows every year.

Price : The stock is trading at about $74.00 and over the last year, the price dropped by 35%. The stock had a downward trend from end of July 2014 until the 3 of February 2015. Then it did a pull back the 16 of March and then started an uptrend that may last for a while. Is a good time to think about buying it based on technical view and of course based on fundamental view.

Currently, the price is down 38.09% from its 52-week high and up 36.37% from its 52-week low. The 200-days Moving Average price is $82.24

The stock looks undervalued at current prices. The Peter Lynch value gives a fair value of $158.02 with a margin of safety of 53%, the DCF model gives a fair value of $191.59 with a margin of safety of 62%.

Dividend Yield : HP has a dividend yield of 3.65% with a growth rate of 62.00% over the last 5 years. The payout ratio is 39% and based on current growing rates, if you buy the stock now and if the growing rate of the dividend yeld is confirmed, in 5 years every investor (thanks to dividends) will receive a 40.17% of return.

Gurus & Insiders : According to Guru Focus, the main Guru(s) holding HP are Chuck Royce (Trades, Portfolio) and Ron Baron (Trades, Portfolio), holding each one 1.48% of shares Outstanding. During the Q4 of 2014 many gurus sold out their shares: they are FPA Capital Fund (Trades, Portfolio), First Pacific Advisors (Trades, Portfolio), James Barrow (Trades, Portfolio), Steven Cohen (Trades, Portfolio), Louis Moore Bacon (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio) and Ray Dalio (Trades, Portfolio)

There are no recent activities by Insiders. HP has 91.0% of Institutional Ownership and 3.0% of Insiders Ownership.

Compounding : Over the last 6 years of data (starting from December 2010) the company had the following compounding returns :