Norsk (NYSE: NHY)
is a bid of an odd corporate bird. The company operates in two main
lines of business: oil (exploration and production) and aluminum
(manufacturing).
Although Norway has become an oil production powerhouse in its own
right, Norsk doesn't limit its activities to its home turf (which, by
the way, isn't really "turf," as it's mostly underwater on the
Norwegian continental shelf). Norsk also develops hydrocarbon deposits
as close by as Russia and as far away as Canada, Angola, and Libya. The
company claims proven reserves in excess of 1.4 billion barrels of oil
equivalent.
Knowing this allows an investor to compare Norsk to its competitors
in one of two ways: price-to-earnings — and the several variations
thereon — or price-to-barrels. So, for example, on one hand you can
argue that Norsk is overpriced because it has a 12.7 trailing P/E,
whereas rival BP (NYSE: BP)
sells for just 10.7 times trailing earnings. The disparity is even more
glaring in light of analyst expectations that BP will grow its earnings
more than twice as fast as Nordic over the next few years. But you can
also say that Norsk looks overpriced on the basis of its reserves being
priced at $20.10 per barrel versus BP's $15.80 per barrel.
Although it's true that Norsk gets most of its revenues from its aluminum division, which competes with Alcoa (NYSE: AA) and Alcan (NYSE: AL),
Norsk's oil arm produces 98% of its profits. From that perspective,
even with Norsk trading at a discount to Alcoa and Alcan, I have to
conclude that the firm as a whole looks expensive in comparison to the
alternatives. Give this one a bronze medal at best.
BUY, SELL, KEEP 
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