Friday 5 July 2013

Analysis of Aker Solutions

Norwegian service provider for oil/gas industry

Company: Aker Solutions

Business: This Norwegian company provides oilfield products, systems and services for customers in the oil and gas drilling, field development and production.

Active: They are present world wide but in the end world wide only represents 30 countries in this case where their 28k employees are working.

P/E: 9.9

Also this company came from a request as can be seen here.

Containing P/E and P/B values as well as dividends

The P/E of Aker Solutions is very good with 9.9 and also the P/B turns out acceptable with 1.9 which gives a clear buy according to Grahams formula. The earnings to sales is surprisingly bad with only 5% I would have expected something better for a service company to the oil industry. The book to debt is so, so with a ratio of 0.4. The growth has for the last five years been very bad with negative 5% yearly which would give a motivated P/E of something between 6 to 8. Back in 2010 they made a major restructuring of the company which seems to have been the major reason for the significant revenue drop between 2008 and 2012. Still with a current P/E of almost 10 this means that the market has today a good value on the company. They paid a dividend of 4.7% which represents 47% of earnings so both parameters are fully ok.

Conclusion: Based on the Graham formula and the dividends it can be considered an acceptable company to buy today. I do however not like two things. The drop in revenue from 2008 and that the company is not valued cheap on the market in comparison to the motivated P/E. Personally I would therefore not buy it.

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