Friday, July 25, 2014

Seeking Alpha: Cameron Showing Some Much-Anticipated Margin Progress

Owning Cameron (NYSE:CAM) shares hasn't always been the easiest investment play, as these shares have delivered plenty of volatility in response to order flow and margin progress (or lack thereof). Management dug itself into a hole on the margin side with inadequate production capacity, but that issue seems to be on its way to a strong resolution. Cameron has also regained a lot of momentum in the subsea market and the joint venture with Schlumberger (NYSE:SLB) should continue to pay off in opening doors to new business.

The issue with Cameron shares typically comes down to timing. Cameron should be looking at several years of good revenue and margin/FCF performance as it delivers on its large order book. At the same time, I believe we are looking at an extended cycle as more and more energy companies go offshore to find production growth. Discounted cash flow unsurprisingly isn't a lot of help, but the difference between a 9x and 10x EBITDA multiple on the shares swings the fair value by almost $9.

Read more here:
Cameron Showing Some Much-Anticipated Margin Progress

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