PDS Precision Drilling Corporation New

In this volatile market it makes sense to pay attention to stock values. Where are they today, and where are they anticipated to be? We can find out these answers to determine value by looking at the current stock price and the estimated price targets.

Every well-followed company has a list of analysts who provide, on a quarterly basis, their earnings estimates for that company going forward. They will usually provide a price target as well based on a number of metrics, but grounded in some form of discounted future cash flows. That is, what amount of money do they expect this company to generate in the form of free cash flow in the future?

Furthermore, by discounting these cash flows back to today, what value can be reasonably applied to the company's stock? When you have a large enough number of analysts providing this type of data, you can easily find an average (mean) or consensus number that best exemplifies a high probability result. It is in this context that we will search for companies with the best price appreciation potential based on the average estimates to their price targets.

For a simple example: if company XYZ trades at $5 and the average analysts' price target is $7.50, then its price potential would be 50%. To arrive at that number we simply subtract the current price of 5 from the average price target of 7.50 and that answer (2.5) is then divided by the current price (5). Visually, it looks like this: (7.5 – 5 = 2.5) & (2.5 / 5.0 = .50 or 50%). This is the price appreciation potential we could anticipate from this stock.

Parameters Defined

In order to determine which stocks we want to screen for, we need to set up some basic parameters. For one, I want stocks where there are at least 7 different analysts providing data. A good way to reason this parameter is by appreciating that the larger the sample of data we use, the stronger its result. Also, any data points that are too far on the extreme will be averaged in toward the center.

While I'm at it, I will also request that each stock come with at least a Zacks #2 Rank and have a market capitalization of minimally $3 billion. You can achieve this by simply going to the Zacks Custom Screener and entering in the information as shown below:

First ADD each of the criteria with the appropriate number in the box and then RUN the screen.

Improving Your Screening Results

In addition to creating a subset of companies to filter, you may want to add some additional criteria. The Research Wizard can help to broaden our category options and create our Price Potential calculation. Let's begin by using the Research Wizard to add 2 additional criteria to this screen:

• Pretax Margin Average for the last 5 years of greater than 20%. This will bring forth companies who have maintained a consistent, positive financial posture.
• Relative Strength (vs. S&P 500) of over 60% for the last 4 weeks. This will produce stocks whose performance has been among the best in the market in the last month. This should eliminate any companies that have been showing signs of underperformance relative to the broader market.

Next, I need to add the Price Appreciation Potential calculation to the report. With the Research Wizard, this is an easy task. As you will see here, not only are there an expanded number of criteria to choose from (over 650 different financial measures), but you can actually create your own criteria! Remember our calculation of Price Appreciation Potential from the third paragraph above. Here is a graphic representation:

• Item 242 = Average Short Term Target Price
• Item 5 = Current Price

In our calculation creation area, we will input our subject heading for our report column and then add the calculation itself ((i242 – i5)/ i5 * 100. We multiply the calculation by 100 to convert our decimal answer into a readable percentage format.

Click 'OK' and now it's ready to go. Then from the main page click 'Run Query' and a broad list of diverse companies is produced with their expected appreciation, pretax margins and all of the other data I screened for.

5 Stocks to Buy

From the results of this screen, I will choose a diverse set of 5 stocks with some of the strongest metrics.

• Apple Inc. (AAPL) has to be considered one of, if not the strongest company on the globe today in a number of areas, including innovation, product leadership, marketing and sales. Apple designs, manufactures and markets personal computers and related personal computing and communicating solutions for sale primarily to education, creative, consumer and business customers.
• Baidu Inc. (BIDU) is the 'Google' of China, the world's largest and fastest growing Internet market. The company offers a Chinese language search platform and conducts its operations principally through Baidu Online Network Technology Co., Ltd., a network of third-party Web sites and software applications. Furthermore, the company offers Japanese search services, including Web search, image search, video search and blog search capabilities. It also offers online marketing services to its customers directly and through other distribution networks.
• Coach Inc. (COH) is a well sought after brand maker of fine leather goods the world over. The company attributes the prominence of the Coach brand to the unique combination of its original American attitude and design, its heritage in fine leather products, its superior product quality and durability, and its commitment to customer service.
• Potash Corp. of Saskatchewan Inc. (POT) is the world's largest potash company, the third largest phosphate producer and the second largest nitrogen producer in the world. Behind its growing success lies a vital infrastructure: knowledgeable PCS Sales staff throughout Canada and the United States, a transportation network that includes truck, train, barge, lake ship and ocean vessel, and warehouses strategically located in major consuming areas.

  Precision Drilling Corp. (PDS) is another well run Canadian outfit. Precision Drilling Corporation is an oilfield services company. It provides contract drilling, well servicing and strategic support services to the oil and gas industry in North America and internationally. It provides land drilling, directional drilling, turnkey drilling, camp and catering services, procures and distributes oilfield supplies. It also offers service rigs for well completion and workover services, snubbing services and wastewater treatment services, tubulars, well control equipment, wellsite accommodations. Precision Drilling Corporation is headquartered in Calgary.

Conclusion

Screening for potential price appreciation can be a great way to highlight winning stocks. By utilizing the professional screening tools that Zacks has to offer can make this task both fun and rewarding. Our Custom Screener offers you instant screening capabilities and the Research Wizard allows for descriptive reports and custom calculations. Making yourself a better and more informed investor puts you on the path to success.

David Bright is a member of the Zacks Research Wizard Group and contributes Investment Ideas utilizing tools available at Zacks.

Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

Disclosure: Performance information for Zacks’ portfolios and strategies are available at: http://www.zacks.com/performance.

 
APPLE INC (AAPL): Free Stock Analysis Report
 
BAIDU INC (BIDU): Free Stock Analysis Report
 
COACH INC (COH): Free Stock Analysis Report
 
PRECISION DRILL (PDS): Free Stock Analysis Report
 
POTASH SASK (POT): Free Stock Analysis Report
 
Zacks Investment Research