Unveiling Frontline Plc (FRO)'s Value: Is It Really Priced Right? A Comprehensive Guide
Frontline Plc (NYSE:FRO) experienced a daily loss of 5.33% and a 3-month gain of 24.61%. Its Earnings Per Share (EPS) stands at 3.7. The question that arises is whether the stock is fairly valued. This article presents an in-depth valuation analysis of Frontline Plc (NYSE:FRO). Read on for a comprehensive assessment of the company's intrinsic value.
Company Introduction
Frontline Plc is an international shipping company engaged in the seaborne transportation of crude oil and oil products. The company operates through the tankers segment, which includes crude oil tankers and product tankers. Its geographical area of operation includes the Arabian Gulf, West African, the North Sea, and the Caribbean. Frontline earns revenue through voyage charters, time charters, and a finance lease. It is also involved in the charter, purchase, and sale of vessels. The company's stock price stands at $17.06, with the GF Value estimated at $16.62, indicating a fair valuation.
Understanding GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. The GF Value is calculated based on historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line on our summary page provides an overview of the fair value at which the stock should ideally be traded.
Frontline Plc (NYSE:FRO) stock is believed to be fairly valued based on the GuruFocus Value calculation. At its current price of $17.06 per share, Frontline Plc has a market cap of $3.80 billion. The stock is believed to be fairly valued, which indicates that the long-term return of its stock is likely to be close to the rate of its business growth.
Financial Strength
Investing in companies with poor financial strength carries a higher risk of permanent loss of capital. Thus, it is crucial to review the financial strength of a company before deciding whether to purchase its stock. Frontline Plc has a cash-to-debt ratio of 0.23, ranking it lower than 66.57% of 1026 companies in the Oil & Gas industry. The overall financial strength of Frontline Plc is ranked 5 out of 10, indicating fair financial strength.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, is generally less risky. Frontline Plc has been profitable 6 over the past 10 years. Over the past twelve months, the company had a revenue of $1.90 billion and Earnings Per Share (EPS) of $3.7. Its operating margin is 42.82%, ranking better than 85.8% of 979 companies in the Oil & Gas industry. The overall profitability of Frontline Plc is ranked 7 out of 10, indicating fair profitability.
Growth is one of the most crucial factors in the valuation of a company. Frontline Plc's 3-year average revenue growth rate is lower than 55.81% of 860 companies in the Oil & Gas industry. However, Frontline Plc's 3-year average EBITDA growth rate is 19.9%, which ranks better than 57.38% of 826 companies in the Oil & Gas industry.
Another way to assess the profitability of a company is to compare its return on invested capital (ROIC) and the weighted cost of capital (WACC). ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. For the past 12 months, Frontline Plc's ROIC is 19.43, and its cost of capital is 6.04.
Conclusion
Overall, Frontline Plc (NYSE:FRO) stock is believed to be fairly valued. The company's financial condition is fair, and its profitability is fair. Its growth ranks better than 57.38% of 826 companies in the Oil & Gas industry. To learn more about Frontline Plc stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
