This week, the Valens Securities team highlights our most interesting equity insight from across our tools and our analysis.
Atwood Oceanics, Inc. (ATW): Market panic around credit risk has driven valuations to historically low levels, but safer fundamental credit risk and longer-term profitability potential warrant equity upside
ATW is trading at historically low valuations. ATW is projected to see ROA’ fall to 2% levels in 2020, as the firm finally rolls off of historical contract pricing. Current projected low ROA’ is not unheard of for the company, as they had similar profitability levels in 2001-2005. However, ATW is in a highly cyclical industry, implying that current market expectations for ROA’ to remain at 2% levels for perpetuity appear overly pessimistic.