TechnipFMC PLC (FTI, Financial) experienced a daily loss of 0.51%, yet it has gained 16.56% over the past three months. Despite this growth, the company reports a Loss Per Share of $0.08. Investors may question if the stock is significantly overvalued. This analysis aims to explore TechnipFMC PLC's valuation, inviting readers to delve into the details that follow.
Company Introduction
TechnipFMC PLC, the largest pure-play offshore service provider, offers comprehensive deep-water offshore oil and gas development solutions. With a history that began with the 2017 merger of Technip and FMC Technologies, TechnipFMC PLC provides a range of subsea equipment and services, as well as surface equipment for onshore wells. When compared with the GF Value—our proprietary measure of fair value—the stock price of TechnipFMC PLC seems to diverge, suggesting a need for a closer look at its valuation.
Summarize GF Value
The GF Value is an estimation of a stock's intrinsic value, factoring in historical trading multiples, a GuruFocus adjustment for past performance and growth, and future business performance projections. If a stock's price greatly exceeds the GF Value Line, it may be overvalued, predicting less favorable future returns. Conversely, a price well below the GF Value Line could indicate undervaluation and the potential for higher returns.
TechnipFMC PLC (FTI, Financial), with its current price of $21.54 per share and a market cap of $9.40 billion, appears significantly overvalued according to GuruFocus' valuation method. This suggests that the long-term return of its stock may not align with its future business growth.
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Financial Strength
Investing in companies with poor financial strength can lead to a higher risk of capital loss. Therefore, it's crucial to assess a company's financial robustness before investing. TechnipFMC PLC's cash-to-debt ratio of 0.35 is lower than 57.83% of its peers in the Oil & Gas industry. With a financial strength rating of 5 out of 10 from GuruFocus, TechnipFMC PLC's financial situation is deemed fair.
Profitability and Growth
A company's profitability is a less risky investment indicator, especially if it has consistently been profitable over time. TechnipFMC PLC has been profitable in 6 out of the past 10 years. With revenues of $7.40 billion and a Loss Per Share of $0.08 over the past 12 months, its operating margin of 5.5% is below average in its industry. GuruFocus ranks its profitability as fair.
The growth of a company is a vital valuation aspect, often correlating with long-term stock performance. TechnipFMC PLC's 3-year average annual revenue growth rate of -1.3% is lower than 73.16% of the companies in the Oil & Gas industry, and its EBITDA growth rate of 0% ranks lower than its peers, indicating potential concerns for value investors.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) provides insight into its profitability relative to the capital invested. TechnipFMC PLC's ROIC of -0.94 is less than its WACC of 9.35, suggesting that the company may not be creating value for shareholders.
Conclusion
In conclusion, TechnipFMC PLC (FTI, Financial) seems to be significantly overvalued. The company's financial health and profitability are considered fair, but its growth rates are less impressive compared to industry standards. For an in-depth understanding of TechnipFMC PLC's financials, interested investors can view its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
