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22-Nov-07
Valuation Completed: 11/21/07 Rating: Avoid Comments: XTO portrays impressive profitability and growth. By focusing on buying wells that others had previously founded/developed, management can reduce costs and increase returns. Their balance sheet show a trend of improved strength. While debt is still high, their asset base more than offsets this risk. One of their main attractions is that they are an energy play with all of their assets in politically safe areas (most other companies have oil interests in politically sensitive areas). This fact would lead to a margin of safety with XTO. Since they hedge a portion of their production, XTO does not show the pure reserve value of others companies. Discounting their earnings gives a stock price of $52 and discounted reserves show a value of $62. I will use the midpoint for a fair value estimate of $57. A 20% haircut would imply an entry point of $46.
Tagged Stocks: XTO
Posted at 06:19 in Watchlist Ideas | Permalink | Top
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