Halliburton Slipping On Crude's Downward Slope - Bulls Await Solid Ground

How far will crude fall this time? And, can a fundamentally sound company have its shareholders rewarded with tempered downside and explosive upside? Below is a look at what might be in store for Halliburton investors.

What The Bulls See

• A healthy annual dividend rate of 1.6 percent

• Attractive valuation metrics:

• An enterprise value of $42.80 billion versus a market capitalization of $36.69 billion

• A price-to-sales ratio of 1.14

• A price-to-book ratio of 2.37

• A P/E ratio of 23 versus expected EPS growth of 32.4 percent for the next year

• 6.86 percent net profit margins that spin off $1.49 billion in positive levered free cash flow annually

• Strong management effectiveness metrics:

• A return-on-assets of 9.59 percent

• A return-on-equity of 14.86 percent

• Some good balance sheet metrics:

• 50.19 percent debt-to-equity ratio

• A current ratio of 2.76

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What The Bears See

• Cash of $2.36 billion versus total debt of $7.84 billion

• A P/E ratio of around 23 that seems expensive versus expected revenue growth of only 4.6 percent

The Technical Take

Technicians note that Halliburton shares may be in a short-term "abc" downside correction with a target of around $40.75. If that support holds up, a move up to the mid-$50s could occur. That's the most bullish scenario.

The more bearish scenario would have the stock in the early stages of a larger "ABC" downside correction, with the nearest support not coming in until $37.30–$38.70. Either way, there appears to be some short-term downside action ahead for the shares.

Overall

Halliburton shares will certainly be a screaming "buy" at some point – likely when the weight of lower crude prices is less of a problem for the sector. The technical crowd would tell even the staunchest bulls to be patient before pulling the trigger on new long positions.