International Seaways Stock Is Estimated To Be Modestly Undervalued

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GF Value
Apr 16, 2021
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The stock of International Seaways (NYSE:INSW, 30-year Financials) is believed to be modestly undervalued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $18.03 per share and the market cap of $505.8 million, International Seaways stock shows every sign of being modestly undervalued. GF Value for International Seaways is shown in the chart below.

International Seaways GF Value Chart

Because International Seaways is relatively undervalued, the long-term return of its stock is likely to be higher than its business growth, which averaged 14.3% over the past five years.

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Since investing in companies with low financial strength could result in permanent capital loss, investors must carefully review a company's financial strength before deciding whether to buy shares. Looking at the cash-to-debt ratio and interest coverage can give a good initial perspective on the company's financial strength. International Seaways has a cash-to-debt ratio of 0.36, which ranks in the middle range of the companies in Transportation industry. Based on this, GuruFocus ranks International Seaways's financial strength as 5 out of 10, suggesting fair balance sheet. This is the debt and cash of International Seaways over the past years:

debt and cash

Companies that have been consistently profitable over the long term offer less risk for investors who may want to purchase shares. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. International Seaways has been profitable 1 over the past 10 years. Over the past twelve months, the company had a revenue of $421.6 million and loss of $0.32 a share. Its operating margin is 33.25%, which ranks better than 94% of the companies in Transportation industry. Overall, the profitability of International Seaways is ranked 4 out of 10, which indicates poor profitability. This is the revenue and net income of International Seaways over the past years:

Revnue and Net Income

Growth is probably one of the most important factors in the valuation of a company. GuruFocus' research has found that growth is closely correlated with the long-term performance of a company's stock. If a company's business is growing, the company usually creates value for its shareholders, especially if the growth is profitable. Likewise, if a company's revenue and earnings are declining, the value of the company will decrease. International Seaways's 3-year average revenue growth rate is better than 86% of the companies in Transportation industry. International Seaways's 3-year average EBITDA growth rate is 97.6%, which ranks better than 99% of the companies in Transportation industry.

Another method of determining the profitability of a company is to compare its return on invested capital to the weighted average cost of capital. Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, International Seaways's return on invested capital is 8.90, and its cost of capital is 5.04. The historical ROIC vs WACC comparison of International Seaways is shown below:

ROIC vs WACC

In short, International Seaways (NYSE:INSW, 30-year Financials) stock shows every sign of being modestly undervalued. The company's financial condition is fair and its profitability is poor. Its growth ranks better than 99% of the companies in Transportation industry. To learn more about International Seaways stock, you can check out its 30-year Financials here.

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