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RigNet -- >>> 3 Undervalued Stocks With Significant Upside Potential




By Anjum Khan
September 26, 2013



http://www.fool.com/investing/general/2013/09/26/three-undervalued-stock-with-significant-upside-po.aspx



RigNet (NASDAQ: RNET ) is an oil field communication provider; the company provides upstream oil and gas industry (both offshore and onshore) with network-based services. RigNet, a small company with a market cap of $566 million and good growth prospects, started its business in 2001 and had an IPO in 2010.

The company's revenue growth has been robust, with a compound annual growth rate of 19% from fiscal 2009 to 2012. Adjusted EBITDA has also increased from $29 million in 2009 to $44 million in 2012, indicating increased operating-level efficiency and profits. Superior operating efficiency is also indicated by an improvement in operating and free cash flow.

The company is currently trading at a P/E of almost 40, with estimated growth of 43% in 2013. A PEG of 0.8 does suggest undervaluation and thus potential upside. RigNet's offshore market share has risen from 7% in 2005 to 30.5% in 2012, and this is indicative that the company has done well with its products and services in a competitive market.

A similar trend can be seen in the company's onshore market, where its market share is 16.5% for the United States. The company is in plans to expand its onshore and offshore market share by penetrating the market of newly built rigs, while at the same time acquiring existing rigs from competitors .

The graph below represents the global fixed and floating rigs that are scheduled to be delivered. With the delivery of these new rigs, the potential market size of the company's business will increase, translating to higher growth.

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