International Seaways Inc (INSW, Financial) recently recorded a daily gain of 5.41% and a three-month gain of 20.02%. With an Earnings Per Share (EPS) of 13.26, the question of whether the stock is fairly valued arises. This article provides an in-depth analysis of the company's valuation. Read on to gain valuable insights.
Company Introduction
International Seaways Inc owns and operates a fleet of oceangoing vessels primarily engaged in the transportation of crude oil and petroleum products. The company's vessel operations are organized into two segments: Crude Tankers and Product Carriers. The fleet consists of ULCC, VLCC, Suezmax, Aframax, and Panamax crude tankers, as well as LR1, LR2, and MR product carriers. The company's stock price is currently $43.47, while the GF Value, an estimation of its fair value, stands at $46.9.
Understanding GF Value
The GF Value represents the current intrinsic value of a stock derived from our exclusive method. It is calculated based on three factors:
- Historical multiples (PE Ratio, PS Ratio, PB Ratio and Price-to-Free-Cash-Flow) that the stock has traded at.
- GuruFocus adjustment factor based on the company's past returns and growth.
- Future estimates of the business performance.
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 other hand, if it is significantly below the GF Value Line, its future return will likely be higher.
International Seaways stock shows every sign of being fairly valued at its current price of $43.47 per share. As the company is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth.
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Financial Strength
Investing in companies with poor financial strength has a higher risk of permanent loss of capital. Thus, it is important to carefully review the financial strength of a company before deciding whether to buy its stock. Looking at the cash-to-debt ratio and interest coverage is a great starting point for understanding the financial strength of a company.
International Seaways has a cash-to-debt ratio of 0.24, which is worse than 65.23% of 1021 companies in the Oil & Gas industry. GuruFocus ranks the overall financial strength of International Seaways at 6 out of 10, which indicates that the financial strength of International Seaways is fair.
Profitability and Growth
It poses less risk to invest in profitable companies, especially those that have demonstrated consistent profitability over the long term. A company with high profit margins is also typically a safer investment than one with low profit margins. International Seaways has been profitable 2 over the past 10 years. Over the past twelve months, the company had a revenue of $1.20 billion and Earnings Per Share (EPS) of $13.26. Its operating margin is 60.16%, which ranks better than 94.52% of 967 companies in the Oil & Gas industry. Overall, GuruFocus ranks the profitability of International Seaways at 5 out of 10, which indicates fair profitability.
One of the most important factors in the valuation of a company is growth . Long-term stock performance is closely correlated with growth according to GuruFocus research. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of International Seaways is11.5%, which ranks better than 52.94% of 850 companies in the Oil & Gas industry. The 3-year average EBITDA growth is 32.2%, which ranks better than 70.73% of 820 companies in the Oil & Gas industry.
ROIC vs WACC
Another way to evaluate a company's profitability is to compare its return on invested capital (ROIC) to its weighted cost of capital (WACC). 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. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, International Seaways's ROIC was 31.17, while its WACC came in at 4.93.
Conclusion
In conclusion, the stock of International Seaways (INSW, Financial) shows every sign of being fairly valued. The company's financial condition is fair and its profitability is fair. Its growth ranks better than 70.73% of 820 companies in the Oil & Gas industry. To learn more about International Seaways stock, you can check out its 30-Year Financials here.
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