International Seaways (INSW, Financial) witnessed a daily gain of 3.58%, with an 8.76% increase over the last three months. The company's Earnings Per Share (EPS) stands at 13.26. But the question remains: is the stock fairly valued? In this analysis, we will delve into the valuation of International Seaways (INSW), aiming to provide a comprehensive understanding of its intrinsic value.
Company Introduction
International Seaways Inc (INSW, Financial) 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 divided into two segments: Crude Tankers and Product Carriers. The fleet comprises ULCC, VLCC, Suezmax, Aframax, and Panamax crude tankers, as well as LR1, LR2, and MR product carriers. With a market cap of $2.10 billion and sales of $1.20 billion, the company's stock is currently priced at $42.44, closely matching its Fair Value (GF Value) of $46.55.
Understanding GF Value
The GF Value represents the current intrinsic value of a stock, derived from GuruFocus's unique methodology. The GF Value Line provides an overview of the fair value at which the stock should ideally be traded. This calculation is based on historical multiples, a GuruFocus adjustment factor based on the company's past returns and growth, and future business performance estimates.
International Seaways (INSW, Financial) appears to be fairly valued according to GuruFocus's valuation method. If the share price significantly exceeds the GF Value Line, the stock may be overvalued with poor future returns. Conversely, if the share price is substantially below the GF Value Line, the stock may be undervalued and have higher future returns. Currently, at $42.44 per share, International Seaways stock seems fairly valued.
Given that International Seaways 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
Companies with poor financial strength pose a high risk of permanent capital loss. To avoid this, investors must review a company's financial strength before purchasing shares. The cash-to-debt ratio and interest coverage of a company are excellent ways to gauge its financial strength. International Seaways has a cash-to-debt ratio of 0.24, ranking worse than 65.37% of 1028 companies in the Oil & Gas industry. The overall financial strength of International Seaways is 6 out of 10, indicating fair financial strength.
Profitability and Growth
Investing in profitable companies, especially those demonstrating consistent long-term profitability, poses less risk. A company with high profit margins is typically a safer investment than one with low profit margins. International Seaways has been profitable over the past two 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%, ranking better than 95.01% of 981 companies in the Oil & Gas industry. Overall, GuruFocus ranks the profitability of International Seaways at 5 out of 10, indicating fair profitability.
One of the most crucial factors in the valuation of a company is its growth. Long-term stock performance is closely correlated with 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%, ranking better than 52.85% of 859 companies in the Oil & Gas industry. The 3-year average EBITDA growth is 32.2%, ranking better than 70.46% of 826 companies in the Oil & Gas industry.
ROIC vs WACC
The profitability of a company can also be evaluated by comparing its return on invested capital (ROIC) to its weighted average cost of capital (WACC). 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. If ROIC exceeds WACC, the company is likely creating value for its shareholders. Over the past 12 months, International Seaways's ROIC was 31.17 while its WACC was 5.25.
Conclusion
In conclusion, the stock of International Seaways (INSW, Financial) appears to be fairly valued. The company's financial condition and profitability are fair, and its growth ranks better than 70.46% of 826 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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