BJ Services Company (BJS) poised to rise
Oil services stocks have recently taken some beating as commodity prices have dropped due to higher than expected inventory. One of these stocks which lost some momentum is BJ Services Company (BJS). This company is one of the leading providers of pressure pumping for oil services within the petroleum industry. The pressure pump is required to cement and stimulate new oil and natural gas wells. An important service that is necessary with new oil and natural gas wells. Currently trading at $27.57, this stock appears to have bottomed and could be poised to move as commodity prices have recovered.The recent negative sentiment surrounding low commodity prices, lower forward guidance and overall concern over the economy regarding inflation have caused BJS to decline. However, in our humble opinion, the recent decline appears to be an opportunity as the firm’s balance sheet and return on equity appears to be sound. In comparing BJS against some of its peers, this stock is currently trading at a fair value given the lower forward guidance.
On the bright side, BJS does a lot of business oversea. In fact, according to the company’s recent earnings report, more than 40 percent of their revenue is derived from outside the United States. This is a big plus as there are growing international demand for gas and oil services. For this reason, we believed services that are provided by BJS will be needed.
Fortunately, BJS is expanding internationally in an attempt to capitalize on this trend and oversea demand. Bottom line is we believed the increased demand for oil services will allow BJS to grow in the coming years. Moreover, the recovery in commodity prices, decent earning growth and improved sentiments from institutional investors could be the catalyst that will drive the appreciation of this stock. We see this stock in the high 30s by December, 2007.