Q: Hello,
Total has nearly no debt, have solid revenue growth, FCF yield of 16.7% F24 (37% F25) and have proved that they can make astute acquisitions.
Is there anything not to like with this company other than being a small cap and economically sensitive to the price of oil?
What is your opinion?
Total has nearly no debt, have solid revenue growth, FCF yield of 16.7% F24 (37% F25) and have proved that they can make astute acquisitions.
Is there anything not to like with this company other than being a small cap and economically sensitive to the price of oil?
What is your opinion?
5i Research Answer:
TOT is an energy equipment and service producer and is now trading at 7.9x times' Forward P/E. Other than being dependent on the cyclical nature (largely due to a cut in spending from oil companies) and small, TOT’s revenue is highly volatile, a severe downturn could make the company’s topline drop by half and last for two years (demonstrated in the last two cycles). Investors need to be mindful of this risk. In addition, we like companies with more aggressive capital returns program, TOT generates good cash flow but only return less than half to shareholders. Still, it is priced right, has positive momentum, a good dividend and a reasonable balance sheet. If the energy sector does well, the stock could do quite well.