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 Stocks for Using A Benjamin Graham Value Investing Strategy – February 2017. 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.
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Downloadable PDF version of this valuation:
Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?
|Defensive Investor; must pass 6 out of the following 7 tests.|
|1. Adequate Size of the Enterprise||Market Cap > $2Bil||$65,446,225||Fail|
|2. Sufficiently Strong Financial Condition||Current Ratio > 2||0.50||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||-193.73%||Fail|
|6. Moderate PEmg Ratio||PEmg < 20||-0.27||Fail|
|7. Moderate Price to Assets||PB Ratio < 2.5 OR PB*PEmg < 50||0.04||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||0.50||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
|MG Growth Estimate||-4.25%|
|MG Value based on 3% Growth||-$73.17|
|MG Value based on 0% Growth||-$42.89|
|Market Implied Growth Rate||-4.38%|
|% 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 $-5.05 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 $0.25 per share, for a yield of 18.4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was -0.27, which was below the industry average of 69.19, 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 $-29.99.
Tidewater Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D+.
Stage 3: Information for Further Research
|Net Current Asset Value (NCAV)||-$29.99|
|Number of Consecutive Years of Dividend Growth||0|
|ModernGraham tagged articles||Morningstar|
|Google Finance||MSN Money|
|Yahoo Finance||Seeking Alpha|
Most Recent Balance Sheet Figures
|Balance Sheet Information||12/1/2016|
|Total Current Assets||$1,164,504,000|
|Total Current Liabilities||$2,340,910,000|
|Shares Outstanding (Diluted Average)||47,068,000|
Earnings Per Share History
|Next Fiscal Year Estimate||-$13.34|
Earnings Per Share – ModernGraham History
|Next Fiscal Year Estimate||-$5.05|
Other ModernGraham posts about the company
|Tidewater Inc Valuation – August 2016 $TDW|
|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|
Other ModernGraham posts about related companies
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.