An offshore oil platform is seen in Huntington Beach, Calif., on Sept. 28, 2014.Reuters
Validea's pick of the week provides a detailed report on a company that scores well in the stock-screening service's model portfolios. On Validea.ca, investors can analyze 1,000 Canadian stocks through 12 different guru-based models and get individual reports on each company. Globe Investor has a distribution agreement with Validea.ca. Try it.
Houston-based FMC Technologies is a global leader in subsea systems and a leading provider of technologies and services to the oil and gas industry. It helps its customers improve shale and subsea infrastructures and operations to reduce cost, maintain uptime, and maximize oil and gas recovery. The company has approximately 20,000 employees and operates 24 production facilities in 14 countries. It has a $10-billion (U.S.) market cap.
Oil and gas services companies have been hit quite hard by the downturn in oil prices we've seen over the past year, but FMC seems to be holding up relatively well -- it actually increased earnings per share (compared to the year-ago period) in the first quarter.
It has grown earnings at an 18-per-cent pace over the long term (using an average of the 3-, 4- and 5-year EPS growth rates), which the Peter Lynch based model likes. It trades for a reasonable 13.8 times earnings (TTM). The Lynch model likes its 0.76 PE-to-growth ratio.
FMC has upped EPS in every year of the past decade, which the Warren Buffett-based model likes. It has averaged a 17.8-per-cent return on retained earnings (those not paid out as dividends) over the past decade, which Buffett model likes. It could pay off its $1.3-billion in debt in less than two years if need be, given its $706-million in annual earnings, which the Buffett model likes. It has averaged a 26.4-per-cent return on equity over past decade, impressing the Buffett model.
FMC has a 9-per-cent profit margin vs. 2 per cent for the oil well services & equipment average.
John Reese is long FTI.
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