How low can WorleyParsons go?

A little under two years ago I met the then CFO of WorleyParsons Limited (ASX:WOR) over drinks at my daughter’s new school. The next day I looked at WOR for the very first time. The shares were then trading at around $16, down 70 percent from the all time of $54.19 and down 30 percent over the last year.

On trailing financials WOR looked interesting, but with an uncertain future and stacks of mining and energy services falling hard I decided to wait.

and wait

and wait some more.

While biding my time a neighbour mentioned buying WorleyParsons. As I recall that was around $10 and despite the near on 40 percent fall since I first looked at WOR the deterioration in the sector appeared to be accelerating.  I held my tongue, as nobody appreciates contrary views to their purchases.

WorleyParsons 2016 top pick for the brave

Credit Suisse have now listed WorleyParsons as one of its top six 2016 stocks picks for the brave. With a projected return of 150 percent.

Buyers beware! That projected return should be taken with a grain, nay a big bag of salt. Back in September 2013 Credit Suisse upgraded WorleyParsons to outperform and increased the target price to $26.60. Credit Suisee said WorleyParsons’ 14-times price-to-earnings ratio and 5 percent dividend yield were compelling.

Someone should have schooled that analyst in the danger of driving forward while looking in the rare view mirror.

 

WOR falling knife

Today WOR trades at $3.35! Has this falling knife bottomed? Is a 94 percent fall from its all time high far enough?

I’m sure I don’t know the answer. However, despite legal action to the contrary management appear to be doing a decent job of navigating difficult times. What I do know is market conditions will one day improve and a leaner WorleyParsons will deliver a 150 percent return and more. It has the balance sheet and cash flow to survive.

After two years of watching and waiting I’m finally confident enough to say WorleyParsons deserves a place on your watchlist.

More importantly, don’t try to catch falling knives! 

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