Comments on SYRG

Hello everyone who is reading this ,

There has been a lot going on in our competition . You may have noticed that there is one particular company that is constantly changing positions and today hit new heights - this is Synergy Resources Corporation ( ticker SYRG ) . We will look first at the annual chart :

You can see that from the beginning of 2013 till now it has made a return of 300% . It is in the Oil and Gas sector. It a newly established company and for the last fiscal year it has doubled its assets :

You can spot something from the balance sheet , that is the company has increased its property and plant equipment rather than its current assets . Obviously the company is growing and expanding to new plantations but we cannot say that for sure until we read some articles but first , as usual , we have to bear in mind the numbers and financial ratios provided to us on finviz .

It has a P/E ratio of 52,45 and it is predicted to be 14,83 . Do you remember what this means ? We have already covered that during seminars . If this is Price/Earnings ratio and it is going down , then this mean that either the price will fall or the earnings will rise .Later , you will see from the income statement that the company has doubled its gross profit for a small period of time .The next important number given is P/S ratio (price to sales ) . It is given as 12,85. This number is calculated as dividing the market cap. to the company's total sales.  So, either the market cap. is too huge (relative to its sales ) or the sales are too little ( relative to its market cap. ) - basically the two mean the same depending on the perspective that you are looking at.Current and Quick ratio are 1,80 and 1,70 respectively . So, we just looked at the balance sheet and we saw that they are actually increasing their long term assets each quarter. They both have liquid assets and property plant - a formula for long growth. The debt to equity is 0,15 , which is sustainable. The earnings per share for the next year is 102,08% , which is a future prediction and can be tricky .Other than that all numbers are green -sales Q/Q ( every quarter they are increasing their sales a lot ) , EPS Q/Q . Also , the net profit margin is positive. 

There are a lot of articles in seekingaplha on SYRG for such a small company , there is one particular that is making really good predictions .( link : http://seekingalpha.com/article/1972741-2-attractive-8-a-share-energy-plays ) . According to Michael  Filloon ( expert in oil and gas industry and small cap companies) there has been extension that has resulted positively on the numbers for Q4 2013 and even he is pointing that SYRG has a substantial liquidity and there is no perspective to liquidity issues in the mere future. Another article from marketwatch says that the increase in the share price in the recent times is primarily because of their program for 11 new horizontal wells . Also , they point out the good revenue and the cash flow . Another article from finance yahoo( link: http://finance.yahoo.com/news/synergy-resources-reports-fiscal-second-100000429.html ) is talking about the results from the second quarter 10-Q . They are focusing on the revenue growth but I wanted to show the increase of production, revenue and sales for a single year : 

Just look at the percentage change in the three categories and I think the comment on it is useless. This is why the share price is rising - the investors believe in the growth of the company . 

Moreover , this company is approved by most rating agencies . I will show you an image from finviz that shows that SYRG has been upgraded for ages : 

I looked at their financial statements . 

The income statement shows that they have increased their revenue and the cost of production remains somewhat unchanged. The annual report gives insight into when the firm started growing so fast - guess what. It was during the period of 2013-2014 - this is exactly the period when the share price shot itself to a record price. They have plans and they implement them , they have new plants , they have new wells , the production is increased , etc. 

The net income from continuing operations is changing for each quarter but you can trace that this is due to changes in the amount that they are spending on taxation. 

The balance sheet looks great as well :

They have increased both their current and long term assets . I put the annual data an purpose to show you that the changes are really significant for 2013 . But they have also increased their long term debt . For year 2013 they have 83M in debt . But again this is sustainable bearing in mind the current and quick ratio and the debt to equity ratio. Obviously, the managers and the CEOs standing behind it are people , who have a plan. 

The cash flow shows the same picture and  the most significant change is in "Total cash flow from financial activities " , which means that their plan is working .( Just to point out what this number shows is that the company is able to raise capital and after that this capital is used to repay the investors ( this refers to companies that have dividend yield )) .

In conclusion I would say that this company has a lot positive numbers and everything looks sustainable. How long this could be sustained is a matter of management . Imagine you are winning money from activities in  your company - if you do not know how to sustain it , even to make more revenue you may end up bad. 

SYRG has been doing green for the time being on the competition with overall gain of about 20% , which is really impressive for one month. 

Hope this post helped you in some way !

Thank you !

Plamen Filipov

Surrey Investing Society 

Comments on ESV

As I promised I will look at other companies that are in the sector " Oil and Gas drilling and exploration" .

This time I will look at Ensco plc (ticker ESV) . The market cap. is 11B and is relatively a large company for its industry. However, its drilling locations are quite disperse around the world and it exports for a lot of other contries. Its headquarters are in the United Kingdom. According to the company's official site ESV is the second largest offshore drilling company . I will give a world map with the destinations the company has invested in  but clearly ESV is operating almost everywhere there is key drilling place on Earth.:

There are other drilling offshore places as well , which are not specified at the official site of the Ensco plc . Obviously, this company is well-known around the world . 

Let's look at the share price movements for the last several months:

Those support and resistance lines are there to show you how it has been moving overall for a specific period of time. What is interesting here is that I could not say at first whether this company's share is a divident yielder or a growth stock.( and of course it could be both) .Looking at the annual price changes, it has been moving just like Hercules Offshore (HERO) for the time before 2009 recession . But there are differences that could be spotted for the period after 2009 , HERO has a straight horiztal line ,whereas, ESV- upward moving . You can always compare the overall performance of two or more than two companies on finance.yahoo.com by putting the company that you are interested in and after that you click on the graph of the company and after that you click "Compare" and you put the ticker of the other company that you are interested in . I will show you what I come up with , when I compared HERO and ESV:

You should note that some of the movements of the two companies conside , this is not some kind of "miracle" pattern , but there could be for a lot reasons e.g. because of price movements in the oil and gas - this will most certainly affect both company's performance.

We may proceeed with the ratios and the indicators. The P/E ratio is 8,21 with is low , for the whole industry. Also, the PEG ratio is below 1 , which could be a sign of undervalued stock as well . Both P/S and P/B shows undervaluation . But , Price to cash ratio is above 50 , which most probably mean that they do not have a lot of current assets , in other words , they do not have a lot of liquidity , they may have invested all their money .The Current and Quick ratio tell another story (Current ratio 1,5 and Quick ratio 1,2)-They have enough money to e.g. sustain their debt but they do not hold cash. They may have deposited their money and they may hold a lot of inventory ( which could be a sign of future expansion of the drilling sides).
Wrong!!! You cannot make conclusions just by numbers , instead you could make possible scenarios. I looked by their balance sheet in advance, so I know the is truth behind the numbers. The truth is that ESV has a lot of Net Receivables , aboout 70% of the current assets is Net Receivables(this is their customers owe them money , they have used the products but they have not paid yet) .All EPS numbers show growth - perhaps slow and sustainable because the numbers are not that impressive ( except the EPS Q/Q which is 50% , really good number for a company as big as ESV).The Net Profit Margin is not just positive but it is 28,5% , the last two numbers show sings for growth (actually growth , but you will see that when we get to the financial statements) . The Insider trans is positive - the insiders believe in their company- Good!
There is one more important thing to note is the volume . The shares of ESV are not that heavily traded i.e. people are neither selling nor buying a lot ( RELATIVE to the size and industry of the company ) , this could be a sign that if there is growth , it is not going to be fast , but steady and secure .

The overall opinion of rating agencies is negative not just on ESV but on the whole sector:

Analysists are doubtful about the oil price in the next few years . Technically speaking , it is generally believe that the oil price will fall in time of recession and vice verse in time of economic growth the oil price rise up
(Link: http://seekingalpha.com/article/2135933-ensco-plc-is-a-6-percent-yield-enough-to-overcome-the-risks-involved-in-holding-the-shares ) . The author of the article Alexander J.Poulos is making predictions that the price of oil will increase in the next two years. He also says that in general , the drilling offshore companies have increased their divident yield rate and ESV is not making an exclusion . A divident yield of 6% sounds attractive for investors .The last 8-K that ESV have reported this month shows that they have new rigs , in particular in gulf of Mexico,Brazil,Malta,Singapore,Malaysia,South Korea,Denmark, Netherland ,UK,India,Saudi Arabiaand Indonesia ->you can see from the report(the link is at the bottom) that ESV is not just drilling offshore but also they reach depth of 10000 in Angola(the latest project finished in 2013) to 250 in Guilf of Mexico, which means that they are quite diverse in their explorations. I read many other articles that I posted below  but I would say that the analysist's opinion is really divided, mostly because some are afraid that the price of the oil will go down. However, there is one more thing that we have to include before going to financial statements and this is the main competitors:

Column1	ESV	DO	NBR	RIG	Industry
Market Cap:	11.67B	6.73B	7.36B	14.65B	1.48B
Employees:	9000	5500	258500	151000	6000
Qtrly Rev Growth (yoy):	0,16	-0,04	0,02	0	0,63
Revenue (ttm):	4.92B	2.84B	6.15B	9.48B	485.49M
Gross Margin (ttm):	0,51	0,45	0,35	0,4	0,65
EBITDA (ttm):	2.35B	1.19B	1.68B	3.51B	258.91M
Operating Margin (ttm):	0,36	0,28	0,09	0,25	-0,27
Net Income (ttm):	1.41B	548.69M	149.88M	1.39B	N/A
EPS (ttm):	6,07	3,95	0,47	3,87	-0,62
P/E (ttm):	8,24	N/A	N/A	N/A	N/A
PEG (5 yr expected):	0,81	0,82	0,44	0,49	7,35
P/S (ttm):	2,37	2,31	1,16	1,54	3,06

I made this table ( source: finance.yahoo.com ) to show you that every single factor used for the comparison of ESV  is better than the other direct competitors. (excluding the revenue where RIG has more revenue relative to its market cap.(Look at the graph of NBR : it made a return of 39% for the last 4 months) .

The first financial statement that we will look at is the income statement .There is not many things that you can conclude because there are not many changes on it .

I can always put those financial statements here but the point is that you should be able to read it and understand it . In our case with ESV there is not much that you can see that has change quarterly (even annually) .There is only one one thing to note from the balance sheet is that ESV is not holding a lot of liquidity, the have invested 14 billion dollars in Plant and Equipment, and that they have nearly 5 billion in long term debt ( which could be a problem , depeding on how they handle it )

If there is not enough information that you can abstract from financial statements , you should look up the
10-K reports that can be found on the official websites of the company that you are researching. The report of ESV is 200 pages , which provides you with a lot information. If you want to make good investment , you need to read to whole report and making points about it. One example with what I found in the report:

They past information about changes in water platforms , but they also provide you with projected information about the future . The funny thing is that you can become a professional in some areas just by reading report . For example , if you research several companies in Oil and Gas drilling and exploration , at some point will know a lot about it. You may have to learn the actual method of extraction , also you may have to study geography to familiarize yourself of the main oil drilling place , etc. This is experiece that you can use e.g. for applying for a job.

Going back to 10-K , the fillings show that EVS revenue has changed a lot between 2011 and 2012 but we cannot say the same for the last year .Obviosly , they are looking to attract investors because they have increased their divident yield a lot . They have new plants . They have new employees making it to 9000 . The report looks really positive on all future prospects.

In conclusion I would say that this company gives you stability and real divident with perspective to future growth . It would be nice to see how it gets to top positions in our competition.
Next time I one of the other three companies in the sector .

Thank you for reading !

Links:
1.Article: http://seekingalpha.com/article/2135933-ensco-plc-is-a-6-percent-yield-enough-to-overcome-the-risks-involved-in-holding-the-shares
2. Investor's information: http://www.enscoplc.com/Global-Operations/default.aspx
3. Article: http://seekingalpha.com/article/2082103-is-ensco-a-good-stock-to-buy
4. Article: http://seekingalpha.com/article/2076753-ensco-a-great-buying-opportunity-in-a-high-yielding-stock
5.Latest 8-K report from April 2014 : http://www.enscoplc.com/Investors/SEC-Filings/default.aspx
6.Latest 10-K report from February 2014 : http://ensco.q4cdn.com/f97564d5-7dfc-4ef6-a33f-39266b5bece8.pdf?noexit=true


Chief editor: Plamen Filipov
Surrey Investing Society 2014 

Comments on HERO

Dear readers,

There has been a lot of changes during the competition and we have been looking at the big winners only . Personally, I have bumped into some of the companies before just by doing the familiar stock screener for growth stocks . Today I will look into details at Hercules Offshore Inc. (ticker HERO).

The company is doing drilling and exploration for oil. The first thing that you have to think of when you see this particular industry should be the supply-demand graph that most of you are all familiar with from economics class. The demand for crude oil is increasing ,at the same time the supply is decreasing:

This is a sample diagram of how it should like the supply demand of oil. The combined effects of increased demand and decreased supply will certainly result in an increase in the price of oil.(We cannot say much about the quantity because we do not know the elasticity of demand i.e. whether oil could be easily substituted) . An increase in the price of oil would lead to gaining more revenue for those who supply oil

But enough of theory. The point is that the world supply of oil is substatially depleted , therefore the companies that make oil exploitation and have success in it , they will be the big winners. We may have to look at history to see what has happened :

What has happened back then in the period 2008-2009 is the aftermath of the recession that has affected the whole sector . I looked at the biggest companies in the sector as well .Back then offshore companies were particularly hard hit but the oil price quickly return to levels comparatively the same as before the crisis. However , some of the companies returned back to their pre crisis share price levels ,whereas HERO's price remained somewhat unchanged for the whole period 2009-2014. You can spot from the average volume that the company's shares are quite a lot traded relative to its competitors, which would imply high volatility.If you look at analysist's recommendation (it could be really biased) , it says that the target price is 7,15 . HERO has been valued as "hold positions" by both finviz.com and Reuters . Also it is a good idea to look at downgrades and upgrades of the rating agencies and the news that is given on finviz :

Universally , you have to look at whether the rating agencies are different since we want impartial mark that could be representative . The case with HERO is that it has been downgraded by three different rating agencies but at the same time there are articles (the green boxes) that are quite positive on HERO . The most recent article that is on seekingalpha says that back then in 2008 a lot of companies closed up because of the recession but HERO remained , although shallow water drilling is really a risky business . The thing about all oil companies is that the cost of exctraction is getting higher and higher making cost of revenue more than previous levels. It is important to note that extracting shallow water oil is easier than deep water reserves. The main driiling place for HERO is in Mexico but as the article states they have constatly been expanding since 2011 and they have new technologies for extracting oil and they can now look even deeper than before.It aslo has higher growth estimates than its competitors. Recently, US have been discussing exporting gas and oil to Ukraine and other European countries , which would imply that each US oil and gas company should increase its supply.
Link : http://seekingalpha.com/article/2110203-hercules-offshore-undervalued-titan-in-the-gulf

As far as the main indicators are concerned,well, it is does not give us its present P/E ratio but it gives a forecast of 6,36 and I looked the whole industry, it turned out that only companies that have a market cap of more than 2B are showing their present P/E ratio.Looking at P/S and P/B , this most probably mean that the company's share is undervalued . The liquidity ratios are problematic, in particular debt/eq. , but we will look at the balance sheets for more information. (Remember that Quick and Current ratio are important in the short run whereas Debt/Eq is more of a long-run factor) . EPS seems fine for this year but the projected EPS for the next year is smaller than this year's one , this could be a sign that investors are not very optimistic about the next year.My favourite indicator EPS Q/Q is missing as well , one of the most important number on the finviz list. Net profit margin is negative which could be bad if the competition was more than one month .It is really important to have in mind that the time frame of one month could be just enough to make the desired profit but the long-run , the price may plum.

We can now proceed at financial statements...

Looking at income statement .The first think that is literary poking you in the eyes is that for the last two years the company has doubled its profits from 196M to 398M

The gross profit increasing each quarter but operating income has decrease substatially for the quarter
Sep 30 2013 . Just to remind what operating income is : this is what is left from the gross profit after you exclude operating expenses, ammortization and depreciation . And if the gross income is positive this means that the some of these three exceeds the gross income. Always spot the huge changes , examples with HERO would be non recurring income and taxes .

Let's look at the balance sheets of HERO :

Note that the firm has a lot of assets that are long run . Calculating it you would get 25% of its assets are liquid (refer back to the balance sheet post about assets) .You see that for the whole period 2013 , the comapny has been constantly increasing its property plant and equipment ,which verifies what we have previously read that the company is growing(new plants , methods of extrating oil,etc.) . Many numbers are missing , which could be explained by the size of the company i.e. the numbers for them would be too small to be recorded.

Let's see the liabilities as well :

It is really important that after you read the articles and look the numbers at the balance sheets , you can make a complete "storyline" . Here the story would be that in the first quarter of 2013 the company needed money to accomplish its plans for the development and this was accumulated as a long term debt in the second quarter. The overall equity would be decreased but this does not necessarily mean that the company shrinks . 

There are a lot more things to write about HERO but sometimes an analysis of a company is like an 

open-ended book. To make a conclusion , I would say that this company is a hold position as we still need time to see what will happen with this new promissing equipment. I remember that when I first bump into this company I was looking for growth stock. The price was stable today , it would be really interesting to see how it is going to develop this story , although it may be a long term scenario. 

Next time I will look at other companies on our competition list in the same sector as I promised!

Plamen Filipov 

Chief Editor

Surrey Investing Society

                                                 Highlights of April's picks

Hello investors,

The April competition has begun .Most of the times I would write about definitions and analysing numbers of some company's financial statement but today I will look at some of the interesting competitors that you included.

To be honest ,I was quite impressed by some of the picks that you submitted . When the committee looked at the list of 32 stocks , we barely knew some of them , such as CPLP or NCR . Clearly , all of you have used different tactics and this is obvious by the diversity I spotted  - market cap , industry , debt ratios,etc. I even saw that someone picked exchange traded fund.

Today was not a great for NASDAQ(1,22%), Dow (0,83%) and S&P 500 (0,96%) (7.4.2014 18:30) . They were all down that as we know these measurements show the overall performance of market .

Let's look at the first few hours after the opening of the US market (have in mind that each day from Monday to Friday it opens 14:30 GMT and 9:30 US time zone ):

Clearly , there are a lot more picks that down than the " red coloured boxes" . Later today NASDAQ went even further down to 1,60% . Looking at your picks , most of them are down because of the volume , you can see that today investors are selling their shares , for example ESV ,BA , IGLD , NCR , EVK and others. But this should not discourage you - today's down can be tomorrow's up and clearly there are quite clever ideas in this list . The committee of the society is going to write and discuss about your picks for the rest of the competition , so keep yourself updated as it is important to understand one thing -if you are losing why you are losing and if you are winning why you are winning as well . Do not trust on your luck !

I will say what my first impression was but this post is not about specific information .  Let's look how diverse in your choice you were:
1) Market cap.- there are two groups that clearly stand out - the really small companies with market cap between 100M and 500M ; the second group is the medium size , which is like from 500M to 5B . So , statistically. It is not that they are newly founded , but they have relatively small market capitalization .

2) Industry - you are really diverse here as well . There several tendencies that can be spotted .
A) First , there are several companies in "Oil and Gas" drilling . To be honest , most of the articles for this year that concern crude oil will start like "...Expectations of an improving economy and bullish supply data have strengthened oil prices to around $100 per barrel..."(zacks.com) . I think we could make a comparison in the future for those picks , which are SYRG ,EPD ,SU , ESV ,HERO .
B) There are two companies in "Steel and Iron " GGB and PKX, which to be honest I traced the whole day that they were moving together , although their headquarters are in two different countries- I would be interested to see how this story goes on .
C)Two "Drug manufacturers" PRAN and PFI . Actually it is surprising that we have PFI in our list . We will look at it but I found something interesting on PFI case . They are working on a new drug called palbociblis, treating breast cancer .And guess what ... I found it on today's Wallstreet Breakfast , so do not forget to check it out regularly ( here is the whole article if you are interested in PFI
http://www.nytimes.com/2014/04/07/business/breast-cancer-drug-shows-groundbreaking-results.html?_r=0

Of course there are a lot more tendencies that could be noted in your choices but again , we will make comparison between the different industries in the future.

3) EPS Q/Q- Most of you chose it strongly positive , above 50% , so this is the first sign that most of you have been looking for growth stocks .I even found that VTNR has EPS Q/Q of about 1770% , this number is huge but we will look what stands behind it in the mere future .

4) Current and Quick ratio ; debt to equity - the surprise is that pretty much all of you have the sustainable numbers .

5) P/E ratio - again you chose the this ratio to be below 20 , what would most good investors do if they are looking for growth stocks .

There is a lot more than that to look at such as you mostly chose positive operation margin , positive insider's transaction , good analysis recommendation ( which can be quite misleading) ,etc.