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GuruFocus Financial Strength Rank measures how strong a company’s financial situation is. It is based on these factors

1. The debt burden that the company has as measured by its Interest coverage (current year).
2. Debt to revenue ratio. The lower, the better
3. Altman Z-score.

A company ranks high with financial strength is likely to withstand any business slowdowns and recessions.

Financial Strength : 7/10

vs
industry
vs
history
Cash to Debt 0.72
VLOUF's Cash to Debt is ranked higher than
77% of the 544 Companies
in the Global Steel industry.

( Industry Median: 0.31 vs. VLOUF: 0.72 )
VLOUF' s 10-Year Cash to Debt Range
Min: 0.03   Max: No Debt
Current: 0.72

Equity to Asset 0.53
VLOUF's Equity to Asset is ranked higher than
75% of the 527 Companies
in the Global Steel industry.

( Industry Median: 0.47 vs. VLOUF: 0.53 )
VLOUF' s 10-Year Equity to Asset Range
Min: 0.52   Max: 0.67
Current: 0.53

0.52
0.67
Interest Coverage 4.83
VLOUF's Interest Coverage is ranked higher than
59% of the 303 Companies
in the Global Steel industry.

( Industry Median: 6.33 vs. VLOUF: 4.83 )
VLOUF' s 10-Year Interest Coverage Range
Min: 4.55   Max: 9999.99
Current: 4.83

4.55
9999.99
F-Score: 8
Z-Score: 1.53
M-Score: -2.40
GuruFocus Profitability Rank ranks how profitable a company is and how likely the company’s business will stay that way. It is based on these factors:

1. Operating Margin
2. Trend of the Operating Margin (5-year average). The company with an uptrend profit margin has a higher rank.
••3. Consistency of the profitability
4. Piotroski F-Score
5. Predictability Rank•

The maximum rank is 10. A rank of 7 or higher means a higher profitability and may stay that way. A rank of 3 or lower indicates that the company has had trouble to make a profit.

Profitability Rank is not directly related to the Financial Strength Rank. But if a company is consistently profitable, its financial strength will be stronger.

Profitability & Growth : 7/10

vs
industry
vs
history
Operating margin (%) 10.31
VLOUF's Operating margin (%) is ranked higher than
92% of the 537 Companies
in the Global Steel industry.

( Industry Median: 3.00 vs. VLOUF: 10.31 )
VLOUF' s 10-Year Operating margin (%) Range
Min: 8.9   Max: 36.68
Current: 10.31

8.9
36.68
Net-margin (%) 5.02
VLOUF's Net-margin (%) is ranked higher than
86% of the 537 Companies
in the Global Steel industry.

( Industry Median: 1.89 vs. VLOUF: 5.02 )
VLOUF' s 10-Year Net-margin (%) Range
Min: 3.15   Max: 16.68
Current: 5.02

3.15
16.68
ROE (%) 5.56
VLOUF's ROE (%) is ranked higher than
77% of the 541 Companies
in the Global Steel industry.

( Industry Median: 3.35 vs. VLOUF: 5.56 )
VLOUF' s 10-Year ROE (%) Range
Min: 4.16   Max: 43.04
Current: 5.56

4.16
43.04
ROA (%) 2.92
VLOUF's ROA (%) is ranked higher than
79% of the 546 Companies
in the Global Steel industry.

( Industry Median: 1.63 vs. VLOUF: 2.92 )
VLOUF' s 10-Year ROA (%) Range
Min: 2.35   Max: 20.81
Current: 2.92

2.35
20.81
ROC (Joel Greenblatt) (%) 13.05
VLOUF's ROC (Joel Greenblatt) (%) is ranked higher than
89% of the 546 Companies
in the Global Steel industry.

( Industry Median: 5.02 vs. VLOUF: 13.05 )
VLOUF' s 10-Year ROC (Joel Greenblatt) (%) Range
Min: 9.78   Max: 71.62
Current: 13.05

9.78
71.62
Revenue Growth (%) 4.50
VLOUF's Revenue Growth (%) is ranked higher than
78% of the 472 Companies
in the Global Steel industry.

( Industry Median: 0.80 vs. VLOUF: 4.50 )
VLOUF' s 10-Year Revenue Growth (%) Range
Min: -12.7   Max: 27.8
Current: 4.5

-12.7
27.8
EBITDA Growth (%) -2.30
VLOUF's EBITDA Growth (%) is ranked higher than
73% of the 416 Companies
in the Global Steel industry.

( Industry Median: -6.50 vs. VLOUF: -2.30 )
VLOUF' s 10-Year EBITDA Growth (%) Range
Min: -30.5   Max: 67.6
Current: -2.3

-30.5
67.6
EPS Growth (%) -16.30
VLOUF's EPS Growth (%) is ranked higher than
64% of the 344 Companies
in the Global Steel industry.

( Industry Median: -9.80 vs. VLOUF: -16.30 )
VLOUF' s 10-Year EPS Growth (%) Range
Min: -28.1   Max: 122.4
Current: -16.3

-28.1
122.4
» VLOUF's 10-Y Financials

Financials


Revenue & Net Income
Cash & Debt
Oprt. Cash Flow & Free Cash Flow

» Details

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Guru Investment Theses on Vallourec SA

Tweedy, Browne Comments on Vallourec - Nov 29, 2012

Vallourec (VLOUF) is a vertically integrated producer of branded premium seamless steel pipes and connections that have a variety of industrial purposes, the most important of which is for use in drilling for oil & gas, an application where the use of a strong, reliable pipe is critical. Although the company is headquartered and listed in France, it is truly a global enterprise with more than 70% of revenue generated outside of Europe. Revenue from oil and gas operations accounted for 61% of its total revenue in the last quarter. Vallourec's oil & gas segment sells seamless steel pipes and connections primarily for use in unconventional oil & gas plays in the U.S., as well as in deepwater projects throughout the world. These types of wells use considerably more seamless pipes and connections than traditional wells. More importantly, as new sources of oil and gas are in more difficult to drill locations, like deepwater offshore and unconventional shale, there is growth in demand for Vallourec's capabilities. For example, in 1990, deepwater offshore drilling was zero percent of global oil production. Today deepwater drilling produces roughly 5.5 million barrels of oil per day, and is projected to produce roughly 9 million barrels per day by 2020. Also, unconventional gas (shale) has grown rapidly in recent years, and today represents 23% of annual U.S. gas production. Vallourec has been in business for 100 years, and has a limited number of competitors in this niche business of high quality seamless pipes and connections. These products are designed to withstand the extreme temperature, pressure, and other factors related to more complex oil & gas drilling conditions and are protected by a multitude of patents and technical know-how. Vallourec's customers are keenly aware of the environmental risks and safety requirements for drilling, particularly offshore, and thus have a preference for high quality pipes and connections. The cost of these pipes and connections relative to the overall price to drill a well is very low. The price of the pipes provided by Vallourec is 5% to 10% of the total cost of an oilgas well, so there is little to be gained by switching to a cheaper pipe, but a lot to lose. Given the potential for catastrophic environmental disasters (and significant fines), it would not be rational for a drilling customer to scrimp on price for this most important, yet relatively inexpensive component of his or her well.

Facing higher costs in Europe, and with the potential to lower its production costs abroad, Vallourec recently embarked on a major expansion of its production facilities, adding new capacity in the U.S. and in Brazil. These facilities will allow Vallourec to produce its products locally, instead of producing and exporting from Europe. In May 2012, Vallourec's management made a number of announcements, including delays in qualification for the Brazilian plant and higher than expected capital expenditures to bring the U.S. plant on line. The stock sold off significantly and reached what we thought were quite attractive levels over the next month, eventually bottoming near two-thirds of book value. This caught our interest. We began building a position in our Funds in Vallourec at around 28 to 29 Euros per share in late June. At this price, we felt we were paying roughly 69% of the company's stated book value, 82% of tangible book value, and two-thirds of a conservative estimate of the company's intrinsic value. Given the rather concentrated nature of the seamless pipe industry, there were not a lot of comparable M&A deals to examine. However, in 2007, Tenaris, one of Vallourec's major competitors, acquired Hydril, a leading North American manufacturer of premium connections and pressure control products for 15 x EBIT. Consistent with our conservative appraisal policies, we used a lower multiple of 10 x 2013 EBIT to value Vallourec, and purchased shares at approximately two-thirds of that value.

Despite the delays in qualification and the higher than expected capital expenditures, we believe that both projects will ultimately be successful, particularly given the favorable outlook for unconventional shale plays and deepwater. Our evaluation of the business, specifically the connections business, leads us to believe that Vallourec's intrinsic value is greater than its stated book value. Although in the short term the company's legacy exposure to European manufacturing could weigh on the stock, we believe the long term prospects for Vallourec's oil & gas business are quite strong. It has a solid balance sheet with very little debt, which should allow it to weather near term disappointments that may arise. For investors such as ourselves, who are willing to look further out on the investment horizon for our returns, we felt we were being presented with an unusual pricing opportunity.

From Tweedy Browne's Investment Advisor's Letter and Semi-Annual Report.


Check out Tweedy Browne latest stock trades

Ratios

vs
industry
vs
history
P/E(ttm) 17.10
VLOUF's P/E(ttm) is ranked higher than
79% of the 575 Companies
in the Global Steel industry.

( Industry Median: 34.60 vs. VLOUF: 17.10 )
VLOUF' s 10-Year P/E(ttm) Range
Min: 11.03   Max: 25.08
Current: 17.1

11.03
25.08
P/B 0.94
VLOUF's P/B is ranked lower than
60% of the 575 Companies
in the Global Steel industry.

( Industry Median: 0.96 vs. VLOUF: 0.94 )
VLOUF' s 10-Year P/B Range
Min: 0.39   Max: 2.2
Current: 0.94

0.39
2.2
P/S 0.84
VLOUF's P/S is ranked higher than
57% of the 575 Companies
in the Global Steel industry.

( Industry Median: 0.52 vs. VLOUF: 0.84 )
VLOUF' s 10-Year P/S Range
Min: 0.41   Max: 1.4
Current: 0.84

0.41
1.4
EV-to-EBIT 10.65
VLOUF's EV-to-EBIT is ranked higher than
89% of the 575 Companies
in the Global Steel industry.

( Industry Median: 30.88 vs. VLOUF: 10.65 )
VLOUF' s 10-Year EV-to-EBIT Range
Min: 2.2   Max: 16.6
Current: 10.65

2.2
16.6
Shiller P/E 11.80
VLOUF's Shiller P/E is ranked higher than
91% of the 575 Companies
in the Global Steel industry.

( Industry Median: 9999.00 vs. VLOUF: 11.80 )
VLOUF' s 10-Year Shiller P/E Range
Min: 9.91   Max: 15.28
Current: 11.8

9.91
15.28
Current Ratio 1.50
VLOUF's Current Ratio is ranked higher than
66% of the 468 Companies
in the Global Steel industry.

( Industry Median: 1.51 vs. VLOUF: 1.50 )
VLOUF' s 10-Year Current Ratio Range
Min: 1.27   Max: 2.46
Current: 1.5

1.27
2.46
Quick Ratio 0.90
VLOUF's Quick Ratio is ranked higher than
66% of the 468 Companies
in the Global Steel industry.

( Industry Median: 0.88 vs. VLOUF: 0.90 )
VLOUF' s 10-Year Quick Ratio Range
Min: 0.68   Max: 1.67
Current: 0.9

0.68
1.67

Dividend & Buy Back

vs
industry
vs
history
Dividend Yield 2.30
VLOUF's Dividend Yield is ranked higher than
66% of the 413 Companies
in the Global Steel industry.

( Industry Median: 1.67 vs. VLOUF: 2.30 )
VLOUF' s 10-Year Dividend Yield Range
Min: 1.45   Max: 7.81
Current: 2.3

1.45
7.81
Dividend Payout 0.32
VLOUF's Dividend Payout is ranked higher than
83% of the 575 Companies
in the Global Steel industry.

( Industry Median: 6.61 vs. VLOUF: 0.32 )
VLOUF' s 10-Year Dividend Payout Range
Min: 1.38   Max: 2.98
Current: 0.32

1.38
2.98
Dividend growth (3y) -26.70
VLOUF's Dividend growth (3y) is ranked higher than
64% of the 244 Companies
in the Global Steel industry.

( Industry Median: -11.50 vs. VLOUF: -26.70 )
VLOUF' s 10-Year Dividend growth (3y) Range
Min: 0   Max: 132.1
Current: -26.7

0
132.1
Yield on cost (5-Year) 0.45
VLOUF's Yield on cost (5-Year) is ranked lower than
81% of the 425 Companies
in the Global Steel industry.

( Industry Median: 1.64 vs. VLOUF: 0.45 )
VLOUF' s 10-Year Yield on cost (5-Year) Range
Min: 0.29   Max: 1.54
Current: 0.45

0.29
1.54
Share Buyback Rate -2.90
VLOUF's Share Buyback Rate is ranked higher than
66% of the 296 Companies
in the Global Steel industry.

( Industry Median: -0.80 vs. VLOUF: -2.90 )
VLOUF' s 10-Year Share Buyback Rate Range
Min: 0.2   Max: -3.8
Current: -2.9

Valuation & Return

vs
industry
vs
history
Price/Tangible Book 1.09
VLOUF's Price/Tangible Book is ranked lower than
58% of the 575 Companies
in the Global Steel industry.

( Industry Median: 1.18 vs. VLOUF: 1.09 )
VLOUF' s 10-Year Price/Tangible Book Range
Min: 0.45   Max: 2.45
Current: 1.09

0.45
2.45
Price/DCF (Projected) 0.70
VLOUF's Price/DCF (Projected) is ranked higher than
89% of the 575 Companies
in the Global Steel industry.

( Industry Median: 9999.00 vs. VLOUF: 0.70 )
VLOUF' s 10-Year Price/DCF (Projected) Range
Min: 0.53   Max: 0.73
Current: 0.7

0.53
0.73
Price/Median PS Value 1.02
VLOUF's Price/Median PS Value is ranked higher than
76% of the 575 Companies
in the Global Steel industry.

( Industry Median: 1.07 vs. VLOUF: 1.02 )
VLOUF' s 10-Year Price/Median PS Value Range
Min: 0.56   Max: 1.39
Current: 1.02

0.56
1.39
Price/Graham Number 0.85
VLOUF's Price/Graham Number is ranked higher than
52% of the 575 Companies
in the Global Steel industry.

( Industry Median: 1.88 vs. VLOUF: 0.85 )
VLOUF' s 10-Year Price/Graham Number Range
Min: 0.3   Max: 1.58
Current: 0.85

0.3
1.58
Earnings Yield (Greenblatt) 9.40
VLOUF's Earnings Yield (Greenblatt) is ranked higher than
86% of the 450 Companies
in the Global Steel industry.

( Industry Median: 5.20 vs. VLOUF: 9.40 )
VLOUF' s 10-Year Earnings Yield (Greenblatt) Range
Min: 6   Max: 46
Current: 9.4

6
46
Forward Rate of Return (Yacktman) 206.32
VLOUF's Forward Rate of Return (Yacktman) is ranked higher than
99% of the 379 Companies
in the Global Steel industry.

( Industry Median: 2.00 vs. VLOUF: 206.32 )
VLOUF' s 10-Year Forward Rate of Return (Yacktman) Range
Min: 2.6   Max: 307.4
Current: 206.32

2.6
307.4

Business Description

Industry: Steel » Steel
Compare: » details
Traded in other countries:0NR2.country, VK.France, VAC.Germany
Vallourec SA offers a portfolio of innovative and value-added tubular products, with an increasing focus on tubes for oil and gas wells and power stations.

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