Oil & Gas Stocks

Tidewater Inc Valuation – August 2016 $TDW

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – July 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Tidewater Inc (TDW) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Tidewater Inc. provides offshore service vessels and marine support services. The Company operates through four segments: Americas, Asia/Pacific, Middle East/North Africa and Sub-Saharan Africa/Europe. Its Americas segment includes the activities of the Company’s North American operations, which include operations in the United States Gulf of Mexico (GOM), and the United States and Canadian coastal waters of the Pacific and Atlantic oceans, as well as operations of offshore Mexico, Trinidad and Brazil. The Asia/Pacific segment includes its Australian and Southeast Asian and Western Pacific operations. The Middle East/North Africa segment includes its operations in the Mediterranean and Red Seas, the Black Sea, the Arabian Gulf and offshore India. The Company’s Sub-Saharan Africa/Europe segment includes operations conducted along the East and West Coasts of Africa, as well as operations in and around the Caspian Sea, the North Sea, and certain other arctic/cold water markets.

TDW Chart

TDW data by YCharts

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Downloadable PDF version of this valuation:

ModernGraham Valuation of TDW – August 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $151,609,159 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.53 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -148.50% Fail
6. Moderate PEmg Ratio PEmg < 20 -1.54 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.07 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.53 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

Stage 2: Determination of Intrinsic Value

TDW value chart August 2016

EPSmg -$2.14
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth -$30.97
MG Value based on 0% Growth -$18.16
Market Implied Growth Rate -5.02%
Current Price $3.28
% of Intrinsic Value N/A

Tidewater Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, low current ratio, insufficient earnings stability or growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.07 in 2013 to an estimated $-2.14 for 2017. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Tidewater Inc. revealed the company was trading above its Graham Number of $0. The company pays a dividend of $0.75 per share, for a yield of 22.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was -1.54, which was below the industry average of 55.24, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-29.41.

Tidewater Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

TDW charts August 2016

Net Current Asset Value (NCAV) -$29.41
Graham Number $0.00
PEmg -1.54
Current Ratio 0.53
PB Ratio 0.07
Current Dividend $0.75
Dividend Yield 22.87%
Number of Consecutive Years of Dividend Growth 0

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Useful Links:

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Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2016
Total Current Assets $1,281,154,000
Total Current Liabilities $2,431,983,000
Long-Term Debt $0
Total Assets $4,877,858,000
Intangible Assets $0
Total Liabilities $2,665,351,000
Shares Outstanding (Diluted Average) 47,068,000

Earnings Per Share History

Next Fiscal Year Estimate -$4.61
Mar2016 -$3.41
Mar2015 -$1.34
Mar2014 $2.82
Mar2013 $3.03
Mar2012 $1.70
Mar2011 $2.05
Mar2010 $5.02
Mar2009 $7.89
Mar2008 $6.39
Mar2007 $6.31
Mar2006 $4.07
Mar2005 $1.78
Mar2004 $0.73
Mar2003 $1.57
Mar2002 $2.41
Mar2001 $1.53
Mar2000 $1.37
Mar1999 $3.68
Mar1998 $5.18
Mar1997 $2.35

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate -$2.14
Mar2016 -$0.41
Mar2015 $1.27
Mar2014 $2.70
Mar2013 $3.07
Mar2012 $3.60
Mar2011 $4.87
Mar2010 $6.17
Mar2009 $6.26
Mar2008 $4.91
Mar2007 $3.75
Mar2006 $2.35
Mar2005 $1.53
Mar2004 $1.44
Mar2003 $1.90
Mar2002 $2.32
Mar2001 $2.46

Recommended Reading:

Other ModernGraham posts about the company

Tidewater Inc. Analysis – 2015 Update $TDW
21 Companies in the Spotlight This Week – June 14, 2014
Tidewater Inc. Annual Valuation – 2014 $TDW
19 Companies in the Spotlight This Week – 3/15/14
Tidewater Inc. (TDW) Quarterly Valuation

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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