First up is ENSCO PLC (NYSE:ESV), a British provider of drilling services for oil and gas companies. Since the start of the year, the stock has lost roughly 25% of its value. By comparison, Diamond Offshore Drilling Inc (NYSE:DO) and Unit Corporation (NYSE:UNT), two of ENSCO’s competitors, have lost 22% and 13% of their value, respectively. Energy Equipment & Services industry as a whole fell by just 4.7% so far this year according to data by Fidelity.
Analysts are not bullish on ENSCO PLC (NYSE:ESV), yet their consensus is a Hold rating with a price target of $7.41 per share. It represents a 67% upside potential given today’s closing price of $4.42 per share. The company’s Price to Book (P/B) ratio is currently 0.16, significantly lower than Offshore Drilling’s P/B of 0.53 or Unit Corporation’s 0.73 P/B multiple. When looking at the Price to Sales (P/S) ratio, ENSCO shares also seem to be undervalued. Whereas, Offshore Drilling and Unit Corporation shares have a P/S ratio of 1.37 and 1.38 respectively, ENSCO shares are trading at a P/S multiple of 1.02. ENSCO PLC (NYSE:ESV)’s recent financial report has not left investors overjoyed. Although the company’s 2017 fourth quarter financial results surpassed expectations, market participants were disappointed to learn that it registered a loss of $0.66 per share for the year, wider than analysts’ expectations of $0.5 per share. By comparison, ENSCO reported earnings of $1.59 per share in 2016. This put even more pressure on the stock.
Consol Energy Inc (NYSE:CEIX), a coal mining company, ended today’s trading session at $31.69 per share, down 19.4% for the year. Arch Coal, Inc. Class A (NYSE:ARCH), one of Consol’s main competitors, is actually in green territory, up by 3.2% since the start of 2018. Peabody Energy Corporation (NYSE:BTU) is also making progress, currently up by 3.4% for the year.
Consol Energy Inc (NYSE:CEIX)’s latest earnings report shows 2017 was a very good year, as the company managed to increase its revenue and became profitable again. Gross margin rose by 13 percentage points, while operating and net margins turned positive. Shares are currently trading at a trailing Price to Earnings (P/E) ratio of 13, with analysts having projected a forward P/E ratio of 8.14 (the ratio of current price to earnings expected in the next 12 months).
The long-term outlook for coal companies is, however, bleak. The main driver behind their recent success is more favorable regulatory framework. The demand for coal in the Unites States is dependent on the electric power sector. Given the general shift towards cleaner energy and the sector’s preference for natural gas and renewable energy, it is expected that demand for coal will continue to fall. Internationally, the demand for coal is also cooling down, with China and India also favoring clean energy.