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How Does Tsakos’s Valuation Compare to Its Peers and Its Past?

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Valuation multiple 

The forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) valuation multiple is used to value and compare crude tanker companies.

Tsakos Energy Navigation’s (TNP) EV-to-EBITDA multiple is 4.7x as of February 18, 2016.

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Why EV-to-EBITDA?

Crude (DBO) tanker companies are cyclical and volatile in nature. These companies are capital intensive, with high levels of depreciation and amortization. Also, these companies have varying degrees of financial leverage. Such companies are better valued and compared using EV-to-EBITDA multiples.

A forward EV-to-EBITDA multiple tells us how a company is valued for each dollar of EBITDA that it’s expected to earn. A lower ratio may indicate that a company is undervalued, but not always.

Past comparison

Tsakos Energy Navigation is currently trading below its average one-year multiple and just above its lowest multiple from the past year. Its average EV-to-EBITDA multiple for the past year is 6.32x, whereas its highest and lowest multiples for the past year are 8.02x and 4.58x, respectively.

Generally, low valuation multiples follow stock rebounds. If analysts’ estimate for EBITDA is considered to be at an appropriate level, Tsakos Energy Navigation’s valuation multiple indicates good times ahead for investors.

Peer comparison

Tsakos Energy Navigation, which is trading at 4.7x, has the lowest multiple among its peers. The following are the EV-to-EBITDA multiples of Tsakos’s peers:

  • Teekay Tankers (TNK) is trading at 6.27x.
  • Nordic American Tankers (NAT) is trading at 7.54x.
  • DHT Holdings (DHT) is trading at 4.57x.
  • Frontline (FRO) is trading at 4.93x.
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