CEU, Canadian Energy Services – to log or not to log?

ceu a nov 2010 ceu nov 2010

The difference between log-scale or arithmetic can be very instructive. This is Canadian Energy Services, a high tech type of niche oil services provider that specializes in mud , special mud! Only wish we could have found this gem earlier but it simple was not on our radar screen. With a balance sheet of under $300 mln. this is not just small cap. but very small cap. meaning that you can either make a fortune or lose it, there is no middle ground on this one. By the way, some $90 mln. or so of that balance sheet total is “goodwill”, not exactly awe inspiring if you have learned the rudiments of accounting 101.

   The question here is how do you evaluate this stock for a trade. Well if you are very disciplined and fully in control, you may want to buy this as the stock may still go to ,say, $29 or even a little more. See the log-scale chart. On he other hand , if you are arithmetically inclined ( the top chart) you would not even dream of buying this as it reminds you of that bi-plane at the air show that fell back into it’ own fumes right at this point. Will your broker call you at $27 to get out or did he make 199 other recommendations at the same time , and having forgotten you even own it, only talk to you again when the stock is at $4, of course explaining that nobody could have foreseen this event!

My guess is that if this is a good company, with real good mud, you will be able to buy it at around $14 within the year.