Opinions
Gordon Reid
Tidewater Inc.
TDW-N
TOP PICK
Feb 02, 2011
Stock price when the opinion was issued
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They were penalized for carrying so much debt, and were effected by fluctuating commodity prices. But they've sold assets to Altagas to paid down debt. They ceased the dividend to buyback shares. He sold when they cut their dividend. But will watch it.
TDW is an energy equipment and service company, and is now trading at 17x times' Forward P/E. The company’s share price momentum has been quite solid recently. In the last two years, sales growth was solid, but the business moves in line with energy sector cycle. Sales could decline if energy cycle turns to a down cycle. The balance sheet is okay, with net debt of $467M and net debt/EBITDA of 1.5x. The company is paying a dividend, but still issuing shares to do M&A. We are generally not a big fan of companies that keep diluting share count. Interesting momentum, but cyclical name, not cheap, we think investors are better off owning energy companies with more aggressive capital return policies.
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