Contract drilling company Helmerich & Payne’s stock (NYSE: HP) gained 14.4% in the last 5 trading days. This has been a common theme for the companies associated with energy and natural resources industry. Understandably, the prospects of a Covid-19 vaccine paints a more optimistic picture of how the economy could look like 6 months from now. So is this a good time to invest in Helmerich & Payne? Turns out, there are historical considerations, as evident from the output of our AI engine and a quick analysis of financials, that could limit the stock’s gains in coming months. Let’s see how.
Our AI engine analyzes past patterns in stock movements to predict near term behavior for a given level of movement in the recent period. Despite the recent surge in the stock price, it predicts nearly a -6.3% expected return for Helmerich & Payne over the next 1 month. That’s a sharp decline, but could the stock rebound over a longer period of time? Turns out, the answer is yes, but probably not above current levels. Our AI engine predicts roughly flat movement for the stock over the next 6 month time frame. But why such a counter-intuitive result? Because that’s how the stock has behaved typically in the past. Our detailed dashboard highlights the expected return for Helmerich & Payne given its recent move.
But do trends in the underlying fundamentals support our AI engine’s output? Turns out, they do. Our dashboard Big Movers: Helmerich & Payne Moved 14.4% – What Next? lays this out.
THelmerich & Payne’s stock price decreased -62% this year, from $45.43 to $17.28, before moving 14.4% last week, and ending at $19.77. At the beginning of this year, Helmerich & Payne’s trailing 12 month P/S ratio was 1.67. This figure decreased -51% to 0.81, before ending at 0.93. Does the multiple decline suggest that it is a good buy right now? The answer is not straightforward. The multiple has been on a declining trend over the past few years, and it appears that it is for a good reason. While the revenues have been growing, margins continue to be a concern. Helmerich & Payne ’s revenue has increased 55% from $1,805 Mil in 2017 to $2,798 Mil in 2019, although the figure dropped nearly -21% in the last 12 months. But that’s the understandable impact of the Covid-19 pandemic. However, if we look at margins, the company has struggled to remain profitable. The figure changed from -7.1% in 2017 to -1.2% in 2019, and dropped sharply to -17.8% for the last 12 months.
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Thus, Helmerich & Payne needs to create a good control over its profitability for us to consider it as a strong investment. However, do check out a high quality portfolio to beat the market, with over 100% return since 2016, versus 55% for the S&P 500. Comprised of companies with strong revenue growth, healthy profits, lots of cash, and low risk, it has outperformed the broader market year after year, consistently.
Source: Forbes – Money