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Guru Stock at Low Valuation: Tidewater, Inc. (TDW)

December 20, 2009 | About:
Tidewater, Inc. owns and operates one of the world's largest fleets serving the international offshore energy industry. Tidewater vessels can be found in virtually every area of the world where there is significant oil and gas exploration, development or production. These provide a wide range of services including: transporting crews and supplies between the mainland and offshore locations; towing and positioning mobile drilling rigs; assisting in offshore construction projects; and a variety of specialized services including cable laying and 3-D seismic work. Tidewater Inc. has a market cap of $2.41 billion; its shares were traded at around $46.65 with a P/E ratio of 6.3 and P/S ratio of 1.7. The dividend yield of Tidewater Inc. stocks is 2.1%. Tidewater Inc. had an annual average earning growth of 4.3% over the past 10 years.

Gurus' Positions with TDW

Tidewater Inc. is owned by 5 Gurus. 1 Guru Initiated Positions in TDW: George Soros bought 4,800 shares in the quarter that ended on 09/30/2009, which is 0.01% of the $4.41 billion portfolio of Soros Fund Management LLC.

4 Gurus Kept Positions in TDW Unchanged or Slightly Adjusted: David Dreman owns 64,300 shares as of 09/30/2009, which accounts for 0.08% of the $3.85 billion portfolio of Dreman Value Management. Third Avenue Management owns 1,120,578 shares as of 09/30/2009, which accounts for 1% of the $5.3 billion portfolio of Third Avenue Management. Kenneth Fisher owns 509,100 shares as of 09/30/2009, which accounts for 0.08% of the $29.78 billion portfolio of Fisher Asset Management, LLC. HOTCHKIS & WILEY owns 216,100 shares as of 09/30/2009, which accounts for 0.07% of the $14.26 billion portfolio of HOTCHKIS & WILEY Capital Management LLC.

Directors and Officers Recent Trades:Sell:: Executive Vice President Quinn P Fanning sold 1,221 shares of TDW stock on 12/14/2009 at the average price of 44.89, the price of the stock has increased by 3.92% since.



VALUATION RATIOS



TDW

Industry

Sector

S&P 500

P/E Ratio (TTM)

6.45

0.88

15.45

92.78

P/E High - Last 5 Yrs.

56.23

0.18

0.32

18.73

P/E Low - Last 5 Yrs.

4.77

0.02

0.08

5.70





Beta

1.14

1.30

1.10

1.31





Price to Sales (TTM)

1.81

1.67

0.48

2.07

Price to Book (MRQ)

1.01

0.72

1.26

2.65

FINANCIAL STRENGTH



TDW

Industry

Sector

S&P 500

Quick Ratio (MRQ)

2.61

0.97

1.41

0.93

Current Ratio (MRQ)

2.78

1.06

1.74

1.10

LT Debt to Equity (MRQ)

11.61

120.06

64.64

123.75

Total Debt to Equity (MRQ)

12.67

144.79

91.90

183.67

Interest Coverage (TTM)

--

0.17

0.24

25.51

PROFITABILITY RATIOS



TDW

Industry

Sector

S&P 500

Gross Margin (TTM)

50.75

2.57

9.16

29.83

Gross Margin - 5 Yr. Avg.

49.01

32.11

21.54

29.58





EBITD Margin (TTM)

38.84

--

--

--

EBITD - 5 Yr. Avg

40.71

16.40

13.34

17.20





Operating Margin (TTM)

29.12

-1.00

1.37

--

Operating Margin - 5 Yr. Avg.

30.06

10.82

7.68

19.39





Pre-Tax Margin (TTM)

30.86

13.26

0.94

8.46

Pre-Tax Margin - 5 Yr. Avg.

33.44

30.41

7.94

19.05





Net Profit Margin (TTM)

27.85

13.53

0.58

6.63

Net Profit Margin - 5 Yr. Avg.

27.06

25.51

5.37

13.54

MANAGEMENT EFFECTIVENESS



TDW

Industry

Sector

S&P 500

Return on Assets (TTM)

12.11

-0.40

0.17

4.06

Return on Assets - 5 Yr. Avg.

11.54

7.11

4.10

5.74





Return on Investment (TTM)

13.06

-0.59

0.13

5.57

Return on Investment - 5 Yr. Avg.

12.22

10.00

6.31

7.48





Return on Equity (TTM)

16.75

-0.62

0.12

9.71

Return on Equity - 5 Yr. Avg.

16.62

20.01

10.34

15.70

Tidewater is a attractive in so many different categories. It is trading low relative to its valuation both on TTM P/E, P/E based on the past five years, and on fowrard P/E. It is also trading at its book value. With a large percent of its book value based on Property, plant and equipment the real value of these assets are probally much higher. On that basis alone the stock provides a high margin of safety. The stock also is in very healthy financial shape with lots of cash and low debt. The company has enough cash to pay off nearly all its liabilites. The stock also has a forward dividend of 2.1% which is a nice kicker in today's abnormally low yield environment.

Tidewater has very high margins which means that additional revenue growth will likely translate into higher EPS than in relation to other companies. Not only are the margins very good but they have increased significantly the past ten years. They have leveled off slightly due to the severe recession, but the company's margins are still far higher than they were several years ago. This means the company is translating higher revenues into higher EPS, and not just into higher market share.

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 TTM
Revenue 1 1 1 1 1 1 1 1 1 1 1
COGS 0.63 0.63 0.54 0.58 0.64 0.62 0.52 0.46 0.5 0.5 0.49
Gross Margin 0.37 0.37 0.46 0.42 0.36 0.38 0.48 0.54 0.5 0.5 0.51
SG&A 0.11 0.11 0.09 0.1 0.1 0.11 0.1 0.09 0.1 0.1 0.1
R&D --- --- --- --- --- --- --- --- --- --- ---
Other 0.14 0.13 0.11 0.13 0.18 0.13 0.03 0.07 0.09 0.07 0.11
Operating Margin 0.12 0.13 0.26 0.19 0.08 0.14 0.36 0.38 0.32 0.34 0.29
Net Int Inc & Other 0.07 0.07 0.02 0.02 0.01 0 0.01 0.02 0.02 0.02 0.02
EBT Margin 0.18 0.21 0.28 0.2 0.08 0.14 0.37 0.4 0.34 0.35 0.31


The company in the past five years has traded at an average P/E of 16.4. The company is well off its high of $78 reached in July 2007. Even at a price of $78 I believe the company was undervalued. I think TDW in various measures is trading far below its intrinsic value. If the company traded at 1.5x book value which I think is fair for the company especially in relation to the S&P500 current P/B of 2.65 this would make the stock a $70 stock. If the company traded at 2x book value still far below the market average the stock would be $93.

Disclosure: long TDW


About the author:

Jacob Wolinsky
My investment ideas have been inspired by many of value investors including Benjamin Graham, Charles Royce, John Neff, Joel Greenblatt, Peter Lynch, Seth Klarman,Martin Whitman and Bruce Greenwald. .I live with my wife and daughter in Monsey, NY. I can be contacted jacobwolinsky(AT)gmail.com and my blog is www.valuewalk.com

Visit Jacob Wolinsky's Website


Rating: 4.4/5 (12 votes)

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