In seeking value stocks that have seen their share prices greatly diminished this past year based on reduced earnings, I came across Precision Drilling Trust (NYSE: PDS), which has a price earnings ratio (P/E) near 5 and a dividend yield over 10%. According to AOL Money & Finance information the company is Canada's largest drilling contractor with a fleet of 240 service rigs. Its contract drilling units provide drilling services, equipment supply and repair, and on-site catering and management. PDS has extended their reach into the United States this year and has invested in new technology, replaced older rigs, and is preparing for continued expansion. Favorable metrics include a low P/B of 1.57 and high historic profit margins of 40%.
PDS closed today at a price of $15.47 per share near its 52 week low of $15.35, a low set today during the trading day, and 44% off its high of $27.78. The P/E is a trailing figure and is actually higher but the dividend looks secure. The dividends have been paid monthly. The company earned $0.58 for the third quarter implying an annual return of $2.32 if earnings do not slip further. That would give it a forward P/E of 6.68. This is comprable to other energy sector stocks, unless earnings are further eroded. The winter weather makes working PDS's drilling rigs harder. I am looking for the spring thaw to also thaw out its earnings.
Disclosure: I own shares of PDS
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm.
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