Cairn Energy - A good company trading at a substantial discount = a good buy

Davy Research
/Read Important Disclosures

We have analysed Cairn Energy’s capital allocation since late 2011, an important juncture for the company, and conclude that over the last five years the group’s capital allocation has been disciplined. The stock is trading on circa 70% our risk-weighted net asset valuation as well as its book value, which we believe provides a decent margin of safety for equity investors looking for undervalued exploration and production (E&P) plays. The group’s balance sheet also provides a cushion against adverse events. We reiterate our ‘Outperform’ rating.