International Seaways Inc (INSW, Financial) experienced a daily gain of 3.64%, and a 3-month gain of 22.37%. The company's Earnings Per Share (EPS) stands at 13.26. Given these figures, the question arises: is the stock fairly valued? This article aims to provide a comprehensive valuation analysis to answer this question. Read on to delve deeper.
Company Overview
International Seaways Inc operates a fleet of oceangoing vessels primarily engaged in the transportation of crude oil and petroleum products. The company's vessel operations are divided into two segments: Crude Tankers and Product Carriers. Its fleet includes ULCC, VLCC, Suezmax, Aframax, and Panamax crude tankers, as well as LR1, LR2, and MR product carriers.
The company's stock price currently stands at $44.76, while the GF Value, an estimate of fair value, is $46.65. This comparison sets the stage for a deeper exploration of the company's value.
Understanding the GF Value
The GF Value is a proprietary measure of a stock's intrinsic value, computed based on historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line provides an overview of the stock's ideal fair trading value.
If the stock price is significantly above the GF Value Line, the stock may be overvalued and its future return is likely to be poor. Conversely, if the stock price is significantly below the GF Value Line, the stock may be undervalued and its future return will likely be higher.
According to our valuation method, International Seaways (INSW, Financial) appears to be fairly valued. With a market cap of $2.20 billion, the stock is trading close to its GF Value of $46.65. Therefore, the long-term return of its stock is likely to be close to the rate of its business growth.
Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. Therefore, it's crucial to review a company's financial strength before investing. Looking at International Seaways' cash-to-debt ratio and interest coverage can provide a good initial perspective. The company has a cash-to-debt ratio of 0.24, ranking worse than 65.57% of 1034 companies in the Oil & Gas industry. Based on this, GuruFocus ranks International Seaways's financial strength as 6 out of 10, suggesting a fair balance sheet.
Profitability and Growth
Investing in profitable companies carries less risk, especially those that have demonstrated consistent profitability over the long term. International Seaways has been profitable 2 years over the past 10 years, with revenues of $1.20 billion and Earnings Per Share (EPS) of $13.26 over the past 12 months. Its operating margin of 60.16% is better than 94.92% of 984 companies in the Oil & Gas industry. Overall, GuruFocus ranks International Seaways's profitability as fair.
One of the most important factors in the valuation of a company is its growth. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of International Seaways is 11.5%, which ranks better than 52.9% of 862 companies in the Oil & Gas industry. The 3-year average EBITDA growth is 32.2%, ranking better than 70.57% of 829 companies in the Oil & Gas industry.
ROIC Vs WACC
Comparing a company's return on invested capital (ROIC) to the weighted average cost of capital (WACC) is another method of determining its profitability. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. 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 ROIC is 31.17, and its WACC is 5.07.
Conclusion
In conclusion, the stock of International Seaways (INSW, Financial) appears to be fairly valued. The company's financial condition is fair, and its profitability is fair. Its growth ranks better than 70.57% of 829 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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