Scorpio Tankers Inc (STNG, Financial) has recently experienced a daily loss of 3.61%, yet it boasts a 3-month gain of 15.46%. With an impressive Earnings Per Share (EPS) of $11.99, investors are prompted to question whether the stock is significantly overvalued. This article embarks on a valuation analysis journey, inviting readers to delve into the comprehensive assessment that follows.
Company Introduction
Scorpio Tankers Inc (STNG, Financial), a leading marine transportation provider for petroleum products, operates a sizable and environmentally conscious fleet. The company's current stock price stands at $62.24, with a market cap of $3.30 billion. When juxtaposed with the GF Value of $45.57, which estimates the stock's fair value, a deeper valuation analysis becomes imperative to understand Scorpio Tankers' true worth.
Summarize GF Value
The GF Value is a unique metric that encapsulates the intrinsic value of a stock, factoring in historical trading multiples, a GuruFocus adjustment for past performance and growth, and future business performance projections. Scorpio Tankers (STNG, Financial) is currently deemed significantly overvalued according to the GF Value. This suggests that the stock's future return may be lackluster compared to the company's business growth potential.
Given this significant overvaluation, the anticipated long-term return of Scorpio Tankers' stock could be substantially lower than its future business expansion.
Financial Strength
Investing in companies with robust financial strength is crucial to mitigate the risk of permanent capital loss. Scorpio Tankers' financial strength is fairly represented by a cash-to-debt ratio of 0.21, positioning it in a less favorable light compared to 67.54% of its industry peers. However, with a financial strength rating of 6 out of 10, the company's financial health is deemed fair.
Profitability and Growth
Scorpio Tankers' profitability is evident from its consistent performance over the past decade. With a remarkable operating margin of 55.57%, the company outshines 94.7% of its competitors in the industry. Additionally, Scorpio Tankers' revenue growth of 20.3% over the past three years surpasses 70.19% of the industry, indicating a strong growth trajectory.
ROIC vs. WACC
An insightful comparison between a company's Return on Invested Capital (ROIC) and its Weighted Average Cost of Capital (WACC) can reveal its value creation capability. Scorpio Tankers showcases an ROIC of 19.52%, significantly higher than its WACC of 3.25%, suggesting effective capital allocation and shareholder value generation.
Conclusion
In summary, Scorpio Tankers (STNG, Financial) appears to be significantly overvalued in the current market. Despite its fair financial condition and profitability, alongside commendable growth that outperforms a majority of its industry counterparts, the stock's valuation raises questions. For a deeper dive into Scorpio Tankers' financials, interested parties can explore the company's 30-Year Financials here.
To discover high-quality companies that may offer above-average returns with reduced risk, be sure to check out the GuruFocus High Quality Low Capex Screener.
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.
