An Insider Bought This Oilfield Services Company

According to a filing with the SEC, Board member Thomas Moore Jr. bought 12,000 shares of Basic Energy Services, Inc. (NYSE:BAS) on November 8th at an average price of $9.35. This brought Moore’s direct holdings of the stock to a total of 104,000 shares; a trust in his family’s name owns an additional 17,000 shares. Moore has been a frequent buyer of the stock over the course of 2012, with our insider trading database recording buys in June, April, and March (research Moore’s insider activity). Generally, insider purchases are bullish signs (learn more about studies on insider trading). In this case, however, the stock is down 53% year to date and 44% since the end of March. Moore may be confident that the stock is undervalued, but that hasn’t necessarily paid off for investors who followed his last three buys.

Basic Energy Services is an oilfield services business which is primarily involved in well completion and servicing, and as such is exposed for better or for worse to drilling activity. Basic’s sales were down only slightly in the third quarter versus Q3 2011, though this was a reversal from strong performance in the first half of the year (in total, revenue for the first nine months of 2012 was 21% higher from the same period a year earlier). However, all major categories of expenses came in higher last quarter than they had in the third quarter of last year, with the result being that earnings dropped 76%.

The financial community is fairly sour on the company’s prospects. The most recent data showed that 20% of the shares outstanding are held short, even with the stock having fallen so far this year. The sell-side is at least as bearish, with earnings per share for 2013 expected to come in at 33 cents (roughly double, for the whole year, what Basic earned in its most recent quarter). This places the stock’s valuation at a forward P/E of 29.

The two giants in the oilfield equipment and services industry are Schlumberger Limited. (NYSE:SLB) and Halliburton Company (NYSE:HAL). In terms of their earnings multiples there is a substantial spread between the valuations of these two peers: Halliburton’s trailing and forward P/Es are both 10, while Schlumberger trades at 17 times trailing earnings and 14 times consensus earnings for 2013. Halliburton has a considerably lower five-year PEG ratio as well, suggesting that the sell-side does not expect it to underperform the larger Schlumberger in the long term. In terms of recent performance there has been something of a difference- Schlumberger’s earnings up last quarter compared to the same period in the previous year, Halliburton’s down- and so we could see a small premium, but Halliburton looks like a better buy. Read more about why we’d avoid Schlumberger. Either of these two does look considerably safer than Basic, however.

Key Energy Services, Inc. (NYSE:KEG) and Nabors Industries Ltd. (NYSE:NBR) are two other comparable companies. Each of these stocks is down at least 30% in the last year, and their trailing earnings don’t look particularly good relative to their valuation (the trailing P/Es are 28 and 120, respectively) but in these cases Wall Street analysts expect strong rebounds. Specifically, the forward price-to-earnings multiples converge to the 10-11 range, which would normally be a reasonable price. Their revenues have been fairly stable as well. While we’d prefer Halliburton, we do think that investors should at least check to see if these companies have a reasonable path to the degree of improvement that the Street expects.

It’s possible that Basic will rally, but the company doesn’t look like a good value compared to larger industry peers. The insider purchase is something of a positive in our view, but this particular insider has been fairly consistent in buying over the course of the year and the earnings multiples seem high.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

The 20 Most Underrated Movies of All Time

The 10 Fastest Growing Companies in America

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!