Texas (01/02/2014) – Contango Oil and Gas Company (NYSE: MCF) – Hold based on a recent price of $47.26 and a fair value estimate of $48-$53.
The company is in the exploration, development, production and acquisition of natural gas and oil properties onshore and offshore in the shallow waters of the Gulf of Mexico.
There simply is no compelling reason to consider this stock for investment at this time, especially given a y-o-y earnings decline of 30% and y-o-y free cash flow growth of (-96%).
One thing of note which I noticed during my review of the company’s financials was the length of time it takes the company to pay it’s bills, 304 days, and the length of time it takes the company to collect it’s payments, 105 days.
For this size company in this particular industry an AP/AR ratio of 3 may be acceptable. I just know were it me doing business with this company, that long a delay in payment would only happen once. Which may explain why the company has so many partnership agreements.
If you don’t currently own this one, be forever thankful. If you do currently own this one, pray for an acquisition by a major industry player.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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