14, which is actually quite high compared to the S&P 500 at large and so reflects a substantial growth premium currently baked into the stock price. (On a forward P/E basis, HAL is trading at 21.03 times estimated 2010 earnings, versus 15.1 for the S&P 500.) In contrast, a stock like SLB presents very similar exposure to a prospective oil industry rebound, but is even more richly valued on a growth basis. SLB currently has a trailing P/E of 23.98 -- a slight premium compared to HAL -- and consensus forward earnings growth of roughly 4.31%, which would deliver a PEG ratio of 5.56. Within its sector, HAL is a bargain, but even there, better opportunities exist for the careful investor willing to investigate more obscure small-cap names like WSP Holdings Ltd. (WH) with more immediate growth prospects.

The company's balance sheet appears relatively strong, although its true condition may be masked by the shifting tax treatment of the KBR spinout and other factors. Debt ratio has roughly tripled over the last few years (from 0.124 at YE 2005 to 0.34 at YE 2009) and interest expenses are sharply increasing as a percentage of revenue. While the company's current ratio and large ($2 billion) cash reserves indicate that internal cash flows are more than enough to handle near-term debt obligations, the trend is not encouraging, especially since management has expressed a desire to aggressively fund organic growth in the future.

With enterprise value of about $47 billion (counting the 80% stake in KBR at current market value), the company represents a significant opportunity for a buyer who could put together a reasonable takeover bid and a compelling strategic reason to acquire its ongoing lines of business. However, potential buyers are likely to be few in number, as HAL is already the second-largest player in its industry and the established leader, SLB, has been an active consolidator recently as it is. At its current size, it is unlikely that HAL will ever deliver a M&A premium.

The company has maintained dividend discipline over the recession, with split-adjusted...

Still, current yield is 1.20%, making HAL a dubious income investment on a pure dividend basis, even in its industry group. In fact, Halliburton's yield trails most other large-cap oilfield service companies and is worse than average for the group as a whole.
Management has generated appreciable value over the years. Return on assets (ROA) is a healthy 8.04% and return on equity (ROE) is an even more impressive 14.03%, which reveals that HAL has been careful to reward its shareholders over time. The company aggressively repurchased its own stock, retiring roughly 15% of the float (or 157 million shares) between 2006 and 2008 at an aggregate cost of about $5 billion, and management has recently expressed a desire to restart the buyback program.

. Given previous allegations of bribery, overcharging on government contracts, and other questionable practices, the company's ethical reputation is not especially high. Furthermore, while its corporate governance statement does contain numerous checks and balances designed to minimize conflicts of interest within the board and to protect the interests of shareholders, it also fails to separate the positions of chairman and chief executive officer. Instead, these positions are expressly combined "under normal circumstances," which could theoretically put a strong CEO in the position of being able to control discussion surrounding his or her own compensation and continued tenure.

It is true that the creation of a Lead Director role to oversee such discussion may practically limit the CEO's power to pursue his or her own self-interest in these matters, but it also raises the question of why the CEO and chairman positions are combined in the first place. Significantly, the Lead Director does not make policy where the CEO is concerned, but only "manages the discussion" surrounding performance review and "makes recommendations." A truly independent board sets its own agenda and has immediate power over all executive agents. Although many excellent organizations function…