TechnipFMC PLC (FTI, Financial) has recently experienced a notable daily loss of 7.09%, adding to a three-month decline of 8.49%. With a reported Loss Per Share of $0.08, investors are prompted to consider whether the stock is significantly overvalued. This article embarks on a valuation analysis journey to address this pressing question, inviting readers to delve into the following comprehensive financial assessment.
Company Introduction
TechnipFMC PLC is a leading offshore service provider, specializing in integrated deep-water oil and gas development solutions. The company's expertise extends across subsea equipment, engineering, construction services, and surface equipment for onshore wells. Established from the 2017 merger of Technip and FMC Technologies, TechnipFMC PLC has become the largest pure-play offshore service provider in its industry. A critical aspect of this analysis is the comparison between TechnipFMC PLC's stock price of $18.86 and its Fair Value (GF Value) of $10.55, an estimation of its true worth that will be explored in depth.
Summarize GF Value
The GF Value is a proprietary metric that estimates the intrinsic value of a stock, based on historical trading multiples, a GuruFocus adjustment factor, and future business performance projections. It serves as a benchmark for the fair trading value of a stock. When a stock price significantly exceeds the GF Value Line, it suggests an overvaluation, which may result in poor future returns. Conversely, a price below the GF Value Line indicates potential for higher future returns.
TechnipFMC PLC's stock appears to be significantly overvalued, with a market cap of $8.20 billion far exceeding its GF Value. This disparity suggests that the long-term return on TechnipFMC PLC stock may be much lower than the company's future business growth projections.
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Financial Strength
Investing in companies with robust financial strength is crucial to avoid the high risk of permanent capital loss. Analyzing TechnipFMC PLC's cash-to-debt ratio, which stands at 0.35 and ranks below 56.95% of its peers in the Oil & Gas industry, provides insight into its financial stability. The overall financial strength of TechnipFMC PLC is rated at 6 out of 10, indicating that the company's financial health is fair.
Profitability and Growth
Investing in profitable companies, especially those with a track record of consistent profitability, is generally less risky. TechnipFMC PLC has been profitable in 6 out of the past 10 years. Despite a recent Loss Per Share of $0.08, the company's operating margin stands at 5.5%, which is relatively low compared to others in the industry. The profitability of TechnipFMC PLC is deemed fair with a score of 5 out of 10.
When it comes to growth, TechnipFMC PLC's 3-year average annual revenue growth rate is -1.3%, ranking lower than the majority of its industry counterparts. Furthermore, the company's 3-year average EBITDA growth rate is 0%, which is not a positive indicator for value creation for shareholders.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) with its Weighted Average Cost of Capital (WACC) can reveal its efficiency in generating cash flow relative to the capital invested. A higher ROIC than WACC indicates value creation for shareholders. For TechnipFMC PLC, the past 12 months have seen an ROIC of -0.94 and a WACC of 6.55, suggesting the company is not currently generating value for its shareholders.
Conclusion
In conclusion, TechnipFMC PLC (FTI, Financial) presents signs of significant overvaluation. The company's financial condition and profitability are fair, but its growth ranks poorly within the Oil & Gas industry. For a more in-depth understanding of TechnipFMC PLC's financials, interested parties can review 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.
