By J. Royden Ward, Chief Analyst, Cabot Benjamin Graham Value Investor
From Cabot Wealth Advisory 6/10/14 Sign up for Cabot Wealth Advisory—it’s free!
Noble Corp. (NE: Current Price 31.77), founded in 1921 and now based in Switzerland, is one of the world’s leading offshore drilling contractors. The company operates a fleet of 77 offshore drilling rigs. Four new drilling rigs will be added to the fleet during the next 15 months, which will place Noble second in the world (Transocean is first).
Noble is focused on increasing the number of deepwater offshore drilling rigs in its fleet to spur growth and take advantage of strong demand. In recent months, the permitting process in the U.S. Gulf of Mexico has improved, allowing more drilling deepwater units to operate in the Gulf.
Sales rose 21% and EPS soared 59% in the 12 months ended March 31. Noble took delivery of five new rigs during the past six months and will take delivery of two more in the current quarter. The added capacity will help boost revenues by 18% and EPS by 22% to 4.22 during the next 12 months ending 3/31/15. The addition of new rigs leasing at premium rates could boost results even further.
At 9.5 times current EPS and with an attractive dividend yield of 4.7%, Noble is clearly undervalued. In addition, Noble’s P/BV ratio is a low 0.94. Its stock price will likely rise to my Min Sell Price of 63.03 within two years. Buy NE at the current price.
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