Frontline Ltd. owns and operates oil tankers and oil/bulk/ore carriers. The company provides seaborne transportation of crude oil and oil products. Its carriers transport crude oil from the Middle East Gulf to the Far East, Northern Europe, the Caribbean, and the Louisiana Offshore Oil Port, as well as Suezmax tankers trade in the Atlantic Basin, the Middle East, and Southeast Asia. The company was founded in 1948 and is based in Hamilton, Bermuda.
FRO Price Forecast Based on DCF Valuation
DCF Fair Value Target:
We started the process of determining a valid price forecast for Frontline Ltd with a discounted cash flow analysis -- the results of which can be found in the table below. To summarize, we found that Frontline Ltd ranked in the 75th percentile in terms of potential gain offered. Moreover, under all the scenarios we modelled, the output consistently forecasted positive returns. In terms of the factors that were most noteworthy in this DCF analysis for FRO, they are:
40% of the company's capital comes from equity, which is greater than merely 16.68% of stocks in our cash flow based forecasting set.
Frontline Ltd's effective tax rate, as measured by taxes paid relative to net income, is at 0 -- greater than just 23.69% of US stocks with positive free cash flow.
The weighted average cost of capital for the company is 8. This value is greater than just 19.58% stocks in the Energy sector that generate free cash flow.
Terminal Growth Rate in Free Cash Flow
Return Relative to Current Share Price
For other companies in the Energy that have a similar discounted cashflow valuation profile (and ensuing price forecasts) as FRO, try ENLC, SGU, TNP, BSM, and MMLP.
Oil supertankers - which just six months ago enjoyed a windfall as the pandemic cut demand for crude and traders raced to book vessels to store the resulting glut - now earn the lowest in nearly two-and-a-half years.The tankers which can haul 2M barrels of oil are now earning just...
I said that if an alien came to visit, I'd be embarrassed to tell them that we fight wars to pull fossil fuels out of the ground to run our transportation. They'd be like, 'What?' − Neil deGrasse Tyson Crude transporter Frontline (FRO) operates VLCCs, Suezmaxes, and Long Range 2...
Michael A. Gayed, CFA on Seeking Alpha | September 1, 2020
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