Impressive cash flows
With operations moving ahead impressively, cash flows have received a solid boost. Cash flows from operations have been impressive this year, shooting up 29.6% to $1.47 billion. And instead of reinvesting all of the earnings back into the business, the company chose to reward shareholders through share buybacks.
At the very least, it’s a shrewd and calculated move on management’s part to keep shareholders happy, after all the negative publicity the company has been receiving. At best, this is what I’m looking for in a company with a solid business and sound balance sheet. After repurchasing shares worth $1 billion in the second quarter, the board has authorized another $4 billion in its stock buyback program. Should we ask for more?
Is the stock looking cheap?
To me, Halliburton currently looks cheaper that its bigger cousin Schlumberger Limited. (NYSE:SLB). While Halliburton is trading at 21 times its earnings, and Schlumberger Limited. (NYSE:SLB)’s trading at only 18 times earnings, the reason I’m not too interested in the P/E multiple is that Halliburton’s bottom line doesn’t reveal its actual profits. Since April 2010, the company has been making provisions for its part in the Macondo oil spill disaster. This has distorted Halliburton’s actual earnings considerably.
It’s the price-to-book ratio that looks interesting. At 2.63 — compared with Schlumberger Limited. (NYSE:SLB)’s 2.96 — Halliburton looks cheaper against its accounting value (book value) of equity. In other words, Halliburton Company (NYSE:HAL)’s assets may not be fully valued.
A Foolish takeaway
Halliburton has managed to be in investors’ good graces, thanks to a combination of solid performance and shareholder-friendly management. Foolish investors must keep a hawk’s eye on this stock.
The article Is Halliburton’s Stock a Screaming Buy? originally appeared on Fool.com and is written by Isac Simon.
Fool contributor Isac Simon has no position in any stocks mentioned. The Motley Fool recommends Halliburton.
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