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Bonds Are a 'Safe' Investment: A Big Lie Gets Even BiggerAnd one oil service company worth an evaluation is Diamond Offshore (NYSE: DO).
Diamond is a contract driller of offshore oil and gas wells, with a concentration in deepwater drilling. The company has a strong fleet of floater rigs: dayrates for these rigs will continue to increase at double-digit rates, a market condition that reflects their increased value stemming from higher energy prices, and some pricing power for DO.
Further, Diamond has an impressive geographical footprint (rigs operating in the Gulf of Mexico, North Sea, South America, Africa, Australia, and Southeast Asia) and superior client diversification (51 customers). The Reuters F2007/F2008 EPS consensus estimates for DO are $6.75/$11.89.
The risks? Analysts have their eye on a shortage of trained labor and rig components, and potential operation pullbacks in 2008 by integrated energy companies Diamond serves.
Further, with a p/e of about 18 Diamond is not cheap, but the price is reasonable given the company's growth prospects and the secular trend regarding oil and natural gas. Diamond's shares also declined about 10% during the market's November 2007 sell-off, but have held up reasonably well technically, including straddling / remaining above the 50-day moving average. That suggests investors remain primarily positive regarding Diamond's shares, moving forward.
The First Call mean rating for DO is: Buy. [28 firms.] Mean 2008 target: $127.90. [high: $174, low: $89.]
Stock Analysis: Diamond Offshore is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than 1 year should be rewarded from DO's shares. Sell / Stop Loss if you were to purchase shares in this company: $76.
Further, with a p/e of about 18 Diamond is not cheap, but the price is reasonable given the company's growth prospects and the secular trend regarding oil and natural gas. Diamond's shares also declined about 10% during the market's November 2007 sell-off, but have held up reasonably well technically, including straddling / remaining above the 50-day moving average. That suggests investors remain primarily positive regarding Diamond's shares, moving forward.
The First Call mean rating for DO is: Buy. [28 firms.] Mean 2008 target: $127.90. [high: $174, low: $89.]
Stock Analysis: Diamond Offshore is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than 1 year should be rewarded from DO's shares. Sell / Stop Loss if you were to purchase shares in this company: $76.
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