Tidewater Inc (TDW, Financial) has experienced a notable daily gain of 6.71% and an impressive three-month gain of 11.97%. With an Earnings Per Share (EPS) of $1.33, investors are keen to understand whether the stock is significantly overvalued. This article delves into the valuation analysis of Tidewater, providing investors with a deeper understanding of the company's current market position.
Company Introduction
Tidewater Inc provides vital offshore service vessels and marine support to the global offshore energy industry, operating a diverse fleet for various offshore phases, from exploration and field development to production. With a significant revenue stream from West Africa, Tidewater's operations span across the Americas, Asia Pacific, Middle East, and Europe/Mediterranean regions. Despite a current price of $76.07, which places its market cap at $4 billion, the GF Value suggests a fair value of only $18.8, indicating a potential overvaluation.
Summarize GF Value
The GF Value is a unique measure of the intrinsic value of a stock, taking into account historical trading multiples, a GuruFocus adjustment factor for past performance and growth, and future business performance projections. According to this metric, Tidewater (TDW, Financial) appears significantly overvalued. The GF Value Line, which indicates the fair trading value of the stock, suggests that Tidewater's current share price far exceeds its intrinsic worth. This disparity implies that the stock's long-term returns may not align with the company's business growth trajectory.
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Financial Strength Analysis
Before investing in a company's stock, analyzing its financial strength is crucial. Tidewater's cash-to-debt ratio of 0.37 places it below more than half of its peers in the Oil & Gas industry. However, with an overall financial strength rating of 6 out of 10, Tidewater's financial condition is deemed fair.
Profitability and Growth Prospects
Investing in profitable companies, particularly those with a track record of sustained profitability, tends to be less risky. Tidewater has managed to be profitable in 2 out of the past 10 years, with a solid operating margin of 14.4%, ranking above 61.61% of its industry counterparts. Nevertheless, its profitability rank is only 3 out of 10, signaling poor profitability.
As for growth, it's a vital valuation component, often correlating with long-term stock performance. Tidewater's annual revenue growth rate over the past three years is 4.8%, which falls short when compared to industry standards. Additionally, its EBITDA growth rate stands at 0%, placing it at the bottom of the industry.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) offers insight into its profitability relative to the capital invested. Tidewater's ROIC of 7.82 is slightly higher than its WACC of 6.98, suggesting a positive investment return.
Conclusion
In summary, Tidewater (TDW, Financial) appears to be significantly overvalued when considering its fair market position. The company maintains fair financial health but faces challenges with its profitability and growth metrics, which lag behind many of its industry peers. For a more detailed look at Tidewater's financials, investors can explore its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
