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Revisiting Bronco Drilling Company

By Jason on Sun, 2007-01-14 23:09
(via www.themarleygroup.com)

Bronco Drilling Company currently has a book value of $12.95 per share. This means that the market is currently valuing Bronco’s business operations at less than $0.67 per share, $0.10 less than they should earn in the current quarter alone. If shares of Bronco Drilling slide much further, the company will be selling for less than their rigs alone are valued at.

wax on Tue, 2007-01-16 08:04
Title: Bronco Drilling

I took a few minutes to look at the interim financials for this company and based on my back of the napkin scratching, I figure the stock is fairly valued at $14.

With that said, I will also tell you that in March, when the company files its 10K, that valuation number will likely decrease, as interim financials are always dicey to use.

As I say, I've spent more time writing this response than I spent looking at the financials, but a couple of thing stood out.

The first thing was that for every dollar in sales, the company has a net change in cash of ($0.085).

The next thing was that for every dollar in sales the company spends $0.70 on cap ex items. Understandable, they're in the drilling business, a capital intensive business.

The other thing that popped out at me was the company's increasing debt, as well as the company's issuance of new shares of stock.

As an investor, why do I want to applaud management for diluting my investment, which is how I interpreted your post.

So with all of this said, how is the value of an investment in this company at $14, protected?

In my opinion it isn't. And since I'm not about to pay $14 for a $14 stock, my buy target for the company's stock is between $4 and $6.

Wax