Long-Suffering Ensco Bulls May Have More To Endure

Ensco PLC (NYSE: ESV) shares are painting a picture of a true bear market in an individual stock.

This particular bear market is simply a continuation of the macro bear that started with the 2007 peak for Ensco shares. When considering the entire 2007 to current time period one big bear market move (a macro "ABC" downside correction according to some technicians), the stock is now down over 70 percent for this bear market.

When will the energy services sector's future become clear enough for the very cheap valuations springing up to matter? The technicians note that the bulls may have longer to suffer. Let's take a look at the fundamentals and technicals of Ensco to get some answers.

What The Bulls See

• An attractive 2.7 percent annual dividend yield.
• Very cheap valuations: An enterprise value of $9.78 billion versus a market capitalization of $5.29 billion, a price-to-sales ratio of 1.09 and a price-to-book ratio of 0.60.
• A return on assets of 6.69 percent.
• Some acceptable balance sheet metrics: A debt-to-equity ratio of 72 percent and a current ratio of 2.69.

What The Bears See

• Negative net profit margins.
• A negative return on equity of -24.81 percent.
• Total cash of $1.63 billion versus total debt of $6.13 billion.
• Negative levered free cash flow of $132.59 million annually.
• A P/E of just under 9, which actually seems expensive when compared to the estimated annual revenue and EPS growth of -7.2 percent and -30.4 percent.

The Technical Take

Technicians note that like most other energy service names, Ensco has seen a renewed decline after a brief bounce period a few months ago. They note that the stock now sits back below key horizontal line support (created by the 2009 lows) and that the technical pattern (a massive "ABC" downside correction in progress) on the monthly chart suggests the possibility – if not outright likelihood – that Ensco stock makes it all the way down to below $10 before this miserable bear market is over.

Overall…

The negative fundamentals and technicals of Ensco seem to be handily outweighing the cheap valuation metrics right now. At some point, the conditions in the energy services sector will stabilize and allow opportunistic long-term buys to be made without such a significant amount of downside risk. According to the technicals, Ensco just might not be there yet.

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