Player Avatar JakilaTheHun (99.93) Submitted: 8/27/2009 7:55:19 AM : Outperform Start Price: $22.10 NAT Score: -124.39

Could get significantly cheaper in the coming months, but I'm going to go ahead and green thumb. I like the idea of a tanker company with no significant long-term debt. Net tangible assets are worth more than $22 per share. The company has been good about paying out dividends, as well.

NAT has had a poor year by historical standards. They've only earned 44 cents per share over the first two quarters. If I annualize that (88 cents per share), assume a 3% growth rate, write down their vessels by 12%, and assume some minor dilution, I come up with a valuation of $32. The stock is selling at $30, so you can see that this is not the typical JakilaTheHun deep value stock.

However, I like their management's strategy and I'm impressed by the company's past performance. With little debt, NAT is not nearly as risky as other tankers. In a sense, they could be in a win-win long-term situation because if things start to improve, their earnings and cash flows will improve, as well, making the stock worth more. On the other hand, if things continue to get worse in the industry, it might mean that some of their weaker competitors get weeded out, which would be very beneficial to them given their strong balance sheet.

While the present doesn't look spectacular, NAT's past performance has been impressive. They've had earnings of $3.62, $1.56, and $3.14 per share in FY '08, '07, and '06, respectively. Not too shabby, eh? Also, while earnings will suffer a bit in the current environment, free cash flows might get a bit of a boost.

If I run a quick DCF with a 1st year FCF forecast of $1.25 per share (and a 3% growth rate), my valuation jumps to $37.50, which seems pretty realistic to me over the long-term. I'm betting that the company grows long-term, though, so I think this is potentially worth $40 - $50, plus the dividends. That's not too bad. If nothing else, this helps hedge my green thumb on Tsakos (TNP) a bit.

Member Avatar aber1911 (31.00) Submitted: 8/28/2009 7:18:34 AM
Recs: 1

thanks , good comments

J Cramer likes this company too, alot. ...and this can be both a good or bad signal :-) , it dipends how one consider his picks

Featured Broker Partners