Have Investors Already Priced In W&T Offshore, Inc.’s (NYSE: WTI) Growth?

in INVESTING IDEAS by

Shares of W&T Offshore, Inc. (NYSE: WTI) are receiving a lot of investor interest as of late due to the stock’s 98.2% increase over the prior three months. Shareholders are now asking themselves whether the company’s current stock price is reflective of its true value or if shares have even further upside from here.

Let’s take a look at W&T Offshore’s value and outlook based on its most recent financial data to see if there are any catalysts for a price change.


What Is W&T Offshore Worth?

According to our 7 valuation models, W&T Offshore seems to be fairly priced in the market at 10.8% above its intrinsic value. This means if you were to buy W&T Offshore today, you’d be paying a reasonable price for it. If you believe that the stock is really worth $6.82, then there isn’t much room for the share price to appreciate beyond where it’s currently trading.

W&T Offshore, Inc. Valuation Detail
Analysis Model Fair Value Upside (Downside)
10-yr DCF Revenue Exit $6.39 -16.5%
5-yr DCF Revenue Exit $8.65 13.1%
Peer Revenue Multiples $8.39 9.7%
10-yr DCF EBITDA Exit $9.95 30.1%
Peer EBITDA Multiples $11.40 49.0%
10-yr DCF Growth Exit $1.74 -77.2%
5-yr DCF Growth Exit $1.24 -83.8%
Average $6.82 -10.8%

Click on any of the analyses above to view the latest model with real-time data.

Although, there may be an opportunity to buy in the future. This is because W&T Offshore’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.


How Much Growth Will W&T Offshore Generate?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations.

W&T Offshore projected net income chartsource: finbox.io data explorer

With net income expected to grow at an average rate of 10.1% over the next couple years, the future certainly appears bright for W&T Offshore. It looks like higher cash flows are in the cards for shareholders, which should feed into a higher stock valuation.


Next Steps

While many investors tend to categorize stocks as either value or growth plays, the most successful investors view growth in conjunction with a company’s value. Take legendary investor Peter Lynch for example, who is widely known for popularizing the term growth at a reasonable price (GARP).

GARP is a strategy that combines aspects of both growth and value investing techniques by finding high growth companies that don’t trade at overly high valuations. In the application of this strategy, Lynch achieved 29% annualized returns as the manager of Fidelity’s Magellan Fund from 1977 to 1990. Needless to say the importance of analyzing a company’s fair value in addition to its growth prospects.

W&T Offshore’s optimistic future growth appears to have been factored into the current share price with the stock now trading near its intrinsic value. As a shareholder, you may have already conducted your fundamental analysis on the company and the stock’s recent appreciation may have been expected. Therefore, it may be time for investors to take some chips off the table. For prospective investors looking to purchase shares of W&T Offshore, it may be worth holding off until the stock develops a wider margin of safety.

However, if you have not done so already, I highly recommend you complete your research on W&T Offshore by taking a look at the following:

Efficiency Metrics: inventory turnover is a ratio that measures the number of times a company’s inventory is sold and replaced over the year. View W&T Offshore’s inventory turnover here.

Risk Metrics: what is W&T Offshore’s CapEx coverage? This is the amount a company outlays for capital assets for each dollar it generates from those investments. View the company’s CapEx coverage here.

Valuation Metrics: what is W&T Offshore’s price to book ratio and how does it compare to its peers? Analyze Price / Book here.

As of this writing, I did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.

Expertise: Valuation, financial statement analysis. Matt Hogan is also a co-founder of finbox.io. His expertise is in investment decision making. Prior to finbox.io, Matt worked for an investment banking group providing fairness opinions in connection to stock acquisitions. He spent much of his time building valuation models to help clients determine an asset’s fair value. He believes that these same valuation models should be used by all investors before buying or selling a stock. His work is frequently published at InvestorPlace, Benzinga, ValueWalk, AAII, Barron’s, Seeking Alpha and investing.com. Matt can be reached at matt@finbox.io or at +1 (516) 778-6257.

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