Based on the aggregated intelligence of 170,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, oilfield service specialist Flotek Industries (NYSE: FTK ) has received a distressing two-star ranking.
With that in mind, let's take a closer look at Flotek's business and see what CAPS investors are saying about the stock right now.
Flotek facts
| Headquarters | Houston |
| Market Cap | $208 million |
| Industry | Oil and gas equipment and services |
| Trailing-12-Month Revenue | $124.08 million |
| Management |
CEO John Chisholm CFO Jesse Neyman |
| Return on Capital (Average Past 3 Years) | 3.3% |
| Cash/Debt | $7.06 million / $133.07 million |
| Competitors |
Baker Hughes (NYSE: BHI ) CARBO Ceramics (NYSE: CRR ) Schlumberger (NYSE: SLB ) |
Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.
On CAPS, 5.5% of the 237 All-Star members who have rated Flotek believe the stock will underperform the S&P 500 going forward. These bears include jamespeer and TSIF, both of whom are ranked in the top 2% of our community.
Just last week, jamespeer touched on Flotek's seemingly unsustainable price run: "Q4 results have to be pretty amazing to justify this valuation."
Flotek has been a consistent five-star CAPS stock in recent years, but its monstrous 478% return over the past six months has many Fools quickly turning bearish. Currently, Flotek even trades at a rich price-to-cash flow multiple of 69.4, which is a big premium over rivals Baker Hughes (26.4), CARBO (30.1), and Schlumberger (21.1), as well as oilfield service giants Halliburton (NYSE: HAL ) (18.7) and Weatherford (NYSE: WFT ) (15.9).
CAPS All-Star TSIF elaborates on the bear case:
Part of the hype seems to be that three years ago they were creeping up on a $50 stock (when oil was creeping up to $140 a barrel and everyone was drilling in their backyards), and some speculators seem to feel that all company's should regain their former glory, regardless of their current standing post recession.
Land based drilling and well extension does seem to be picking up, especially after the disaster in the gulf, but not to the rate of giving Flotek a 20X book value. ... Oil prices, in my opinion will stagnate on a weakening dollar and a continued slow recovery. I do agree that slow growth is possible with Flotek, but volume is high, on a rapid rise, loyalty is weak, and a pullback is highly likely.
What do you think about Flotek, or any other stock for that matter? If you want to retire rich, you need to protect your portfolio from any undue risk. Staying away from dangerous stocks is crucial to securing your financial future, and on Motley Fool CAPS, thousands of investors are working every day to flag them. CAPS is 100% free, so get started!
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Report this Comment On February 01, 2011, at 11:09 PM, livemore10 wrote:
Flotek's sales are growing 30% per quarter and gross margins exceed 40%. Last quarter sales rate was 40 million and next quarters sales will likely be around 50 million. Once annual sales are at 200 million, the operating profit will be 80 million and the net profit about 40 million, or $1.3 per share with a 30 million share float. The long term debt of $100 million was used to purchase a high margin drilling business and was secured by allowing Bear Sterns to short 4 million shares at around $25. These shares are still owed back to Flotek (now by Goldman Sachs) and become callable back immediately by Flotek if the share price exceeds $35. So as the share price of Flotek rises past $25 or so, the company can force an exchange of this debt and cancel the owed back shares. So no major long term debt. The 30 million short term debt is already covered by the 10 million converts prived at 2.5 per share. There is a clause that forces the conversion of these converible shares once the share price is about about $3.5 at the discretion of Flotek
Report this Comment On March 09, 2011, at 6:42 AM, phlynne1 wrote:
so much for the price of oil today, who could of figured a revolution in the east
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