Small Cap Strategist is published by Crystal Equity Research an independent research resource on small capitalization stocks. Follow along as we discuss the most recent trends in the small-cap sector, investigate interesting companies and pan a few not-so-promising stocks.
The ninth largest holding in the exchange
traded fundPower Shares S&P Smallcap Energy (PSCE: Nasdaq) is HOS.Five percent of the fund assets are invested
in HOS common stock.Hombeck was added
to the S&P Smallcap 600 Index, on which the PowerShares ETF is based, in
January 2007.Thus Hombeck has been in
the ETF from its inception, giving us a good reason to look closer at Hombeck.
Offshore Services (HOS:NYSE) operates a fleet
of supply and transport vessels used to serve off-shore oil and gas
installations.Hombeck has customers in the
Gulf of Mexico, Latin America and the Middle East.Its fleet is composed of fifty offshore
supply vessels for customers with upstream installations.Hombeck uses a fleet of nine barges and
fourteen ocean-going tugs to transport refined and bunker grade oil products
along coastlines.The company reported
$36.9 million in net income or $1.02 per share on $540.3 million in total sales
in the twelve months ending March 2013.Operations generated $159.2 million in cash.
is some debt on Hombeck’s balance sheet, leaving the debt-to-equity ratio at
112.2.Debt totals $1.1 billion.If that figure seems high for a small
company, investors should note that cash totals $714.3 million.The business has historically generated
positive cash flow that supports capital spending and leverage strategies.
has 35.8 million shares outstanding of which 5.5 million are held by
insiders.That leaves a modest 30.3
million shares available for trading.Average
daily trading volume is a modest 490,000 shares.We also note that there is short-interest
equivalent to 10% of the float.Since the
stock is widely held by institutions, the constructive float is significantly
smaller.Modest trading volume, skimpy
float and significant short-interest make an interesting combination that could
lead to price volatility.Indeed the
beta measure for HOS is 1.94.
we note that trading volume is modest, HOS volume has increased over the past
five years.A review of the historical
price chart for HOS reveals an increase in trading volume beginning in January
2007 when Hombeck was added to the S&P Smallcap Index.Another spike in volume can be seen in April
2010 when the PSCE was opened.
consensus price target is $63.36, representing 16% upside from the current
price level.If achieved the new market
capitalization would be $2.2 billion.The implied growth rate is a pinch faster than the average growth rate
for the oil and gas services industry, suggesting that Hombeck may gain value
on other sector players.That could lead
to rebalancing in indices like the S&P Smallcap 600 Energy Index.
Neither the author
of the Small
Cap Strategist web log, Crystal Equity
Research nor its affiliates have a beneficial interest in the companies