Questor: it sells to oil firms and is losing money – but Hunting could prove a worthy find

Here we have a company that is currently loss-making, whose main customers are under pressure from the public, politicians and environmental campaigners alike not to spend money on its core activities and whose share price chart for the bulk of the past decade goes from top left to bottom right in an 80pc decline since 2012.

The stock is Hunting and the oil equipment and services specialist is intriguing for several reasons, not least that sentiment is dead against the sector and its main market, the oil exploration and production industry.

Unloved can mean undervalued and it is here that Hunting catches the eye, on three grounds.

First, Hunting had net assets of $940m at the end of June, or £690m at current exchange rates. Even if you strip out goodwill and other intangible assets ($212m) and factor in forecast trading losses for 2021, its £316m market value means that Hunting’s shares are trading at a fraction of book, or net asset, value. That provides investors with some protection from losses (and potential for gains).

Second, Hunting has net cash on its balance sheet, even allowing for modest lease liabilities, and so it continues to pay a dividend.

Analysts forecast a divi of something like $0.09 in 2022, enough for a 3.5pc yield at the current share price. The balance sheet and lowly valuation mean that brave, contrarian investors can afford to wait for an upturn in business. The yield means they are being paid to wait.

Finally, Hunting may look unappealing on a forecast price-to-earnings ratio of more than 50 for 2022, but that is based on earnings that will still be severely depressed as oil companies keep spending on exploration in check. This is a company whose earnings per share exceeded 40p in 2012, 2013 and 2018 and got close in 2006.

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