Tidewater Inc (NYSE:TDW) has been making waves in the stock market, with a daily gain of 2.47% and a significant 3-month gain of 44.46%. Its Earnings Per Share (EPS) (EPS) stands at 0.94. But the question that looms large is whether the stock is significantly overvalued. This article delves into a comprehensive valuation analysis of Tidewater (NYSE:TDW), providing a clear perspective on its intrinsic value. Read on to gain valuable insights into the stock's current standing and future prospects.
Tidewater Inc provides offshore service vessels and marine support services to the global offshore energy industry. The company operates a diversified fleet of marine service vessels that support various phases of offshore exploration, field development, and production. With its principal geographical areas of operation being the Americas, Asia Pacific, Middle East, Europe/Mediterranean, and West Africa, the majority of its revenue is derived from West Africa. At present, Tidewater's stock price stands at $67.94, with a market cap of $3.60 billion, raising questions about its valuation against the GF Value of $20.39.
Understanding the GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line on our summary page gives an overview of the fair value that the stock should ideally be traded at. If the stock price is significantly above the GF Value Line, it is overvalued, and its future return is likely to be poor. On the contrary, if it is significantly below the GF Value Line, its future return will likely be higher.
According to the GuruFocus Value calculation, Tidewater (NYSE:TDW) appears to be significantly overvalued. This suggests that the long-term return of its stock is likely to be much lower than its future business growth.
Assessing Tidewater's Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. Therefore, it's crucial to review a company's financial strength before deciding to buy shares. Tidewater has a cash-to-debt ratio of 0.94, which ranks better than 58.22% of 1034 companies in the Oil & Gas industry. Based on this, GuruFocus ranks Tidewater's financial strength as 8 out of 10, suggesting a strong balance sheet.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, poses less risk. Tidewater has been profitable 2 over the past 10 years. Over the past twelve months, the company had a revenue of $786.60 million and Earnings Per Share (EPS) of $0.94. Its operating margin is 11.94%, which ranks better than 57.22% of 984 companies in the Oil & Gas industry. However, GuruFocus ranks the profitability of Tidewater at 3 out of 10, indicating poor profitability.
Growth is a critical factor in the valuation of a company. A faster-growing company creates more value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth of Tidewater is 4.8%, which ranks worse than 61.02% of 862 companies in the Oil & Gas industry. The 3-year average EBITDA growth rate is 0%, which ranks worse than 0% of 829 companies in the Oil & Gas industry.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) and the Weighted Average Cost of Capital (WACC) can provide insights into its profitability. For the past 12 months, Tidewater's ROIC is 5.81, and its cost of capital is 12.51. Ideally, the ROIC should be higher than the WACC.
In conclusion, Tidewater (NYSE:TDW)'s stock appears to be significantly overvalued. Despite a strong financial condition, its profitability is poor, and its growth ranks worse than 0% of 829 companies in the Oil & Gas industry. To learn more about Tidewater stock, you can check out its 30-Year Financials here.
To find out high-quality companies that may deliver above-average returns, please check out the GuruFocus High Quality Low Capex Screener.
This article first appeared on GuruFocus.