In the competitive arena of global energy transportation, International Seaways (NYSE: INSW) quietly makes a significant impact. Operating a fleet of 83 tankers, they expertly move crude oil and petroleum products across the globe, playing a vital role in maintaining the stability of global energy markets.
Lately, however, the company’s stock has experienced a significant drop, plummeting from $65 to about $43 in a matter of months.
With such a sharp decline, one has to wonder if Wall Street has been too quick to dismiss its value.
Looking at the company’s enterprise value-to-net asset value (EV/NAV) ratio, which is just 1.47, suggests quite a bargain. Essentially, you’re paying $1.47 for every dollar of the company’s assets, presenting a hefty 76% discount compared to the average company.
However, having cheap assets isn’t the sole factor in determining a stock’s worth. What truly counts is how effectively a company can convert those assets into cash, and this is where International Seaways stands out.
The company has demonstrated positive free cash flow in three of the past four quarters, averaging 5.59% of its net assets during that period. This figure stands impressively 36% higher than the 4.12% average among its peers.
Recent performance underscores International Seaways’ financial robustness.
Despite facing lower market rates, the company’s tankers continued to deliver robust results in the third quarter. Revenue hit $225 million, and adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) reached $130 million. Their largest supertankers netted $29,700 per day, and medium-sized tankers earned $29,000 per day.
Even though these rates have come down from the exceptionally high levels earlier in 2024, they remain significantly above the company’s break-even cost of $13,400 per day, allowing International Seaways to generate strong operating cash flow of $129 million for the quarter.
The company’s confidence is mirrored in its actions as management returned nearly $100 million to shareholders via dividends and share buybacks in the third quarter.
Looking ahead, there is promising potential. Global oil demand is on a swift rise, and the aging tanker fleet worldwide indicates limited new supply. Shipping companies have only ordered enough tankers to expand the global fleet by a mere 13% over the next four years, which means a scarcity of new ships entering the market.
This lack of new supply coupled with continued oil demand allows companies like International Seaways to charge a premium for their services.
Moreover, the company maintains a formidable balance sheet, boasting nearly $700 million in total liquidity. This financial stability provides management with the resources needed to navigate challenges while seizing growth opportunities.
In summary, despite the stock’s recent downturn that might concern some investors, the company’s solid fundamentals tell a different story.
According to The Value Meter, International Seaways is currently “Slightly Undervalued.”
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