Headquartered in Buenos Aires, Argentina, Transportadora de Gas del Sur S.A. (TGS) transports natural gas and produces and markets natural gas liquids in the country. The company operates through the four broad segments of Natural Gas Transportation Services; Liquids Production and Commercialization; Other Services; and Telecommunications.
Hedge funds and institutional investors have recently increased their positions in TGS. PEAK6 Investments LLC purchased a new stake in the company during the first quarter worth about $80,000, Eqis Capital Management Inc. bought a new stake in TGS during the first quarter worth about $81,000, and LPL Financial LLC purchased a new stake during the second quarter worth about $79,000.
Over the past year, TGS’ stock has gained 35.6%. It is up 41.7% year-to-date and 30.2% over the past month to close its last trading session at $6.29. It has also gained 6.6% over the past five days.
Here are the factors that could affect TGS’ performance in the near term:
Solid Financials
For the six-month period ended June 30, TGS’ total revenues increased 3.2% year-over-year to ARS61.65 billion ($456.97 million). Total comprehensive income and EPS both improved 17.7% from the prior-year period to ARS14.94 billion ($110.72 million) and ARS19.84, respectively.
Strong Past Growth Story
TGS’s revenue has grown at a 13.8% CAGR over the past three years and a 56.9% CAGR over the past five years. Its EBITDA and total assets have grown at CAGRs of 10.7% and 58.4% over the past three years. Its EBIT has advanced at a 6.5% CAGR over the same period.
Wide Profit Margins
TGS’ trailing-12-month EBIT margin, EBITDA margin, and net income margin of 35.05%, 45.49%, and 25.50% are 141.2%, 82.1%, and 169.6% higher than their respective industry averages of 14.54%, 24.98%, and 9.46%.
Its trailing-12-month ROE, ROTC, ad ROA of 17.19%, 10.34%, and 8.22% are 10.7%, 60.8%, and 47.8% higher than their respective industry averages of 15.53%, 6.43%, and 5.57%.
POWR Ratings Reflect Promising Prospects
TGS’ strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
TGS has a Momentum grade of A in sync with the stock trading above its 50-day and 200-day Moving Averages of $ 5.50 and $5.54.
The stock has a B grade for Quality, consistent with its broad profitability margins.
In the 42-stock Foreign Oil & Gas industry, it is ranked #8. The industry is rated A.
Click here to see the additional POWR Ratings for TGS (Growth, Value, Stability, and Sentiment).
View all the top stocks in the Foreign Oil & Gas industry here.
Bottom Line
Hedge funds and investors seem to favor TGS lately. Moreover, its wide profit margins look promising. As the stock has gained significant momentum this year despite a broader market sell-off, supported by the surging natural gas prices, I think the stock might be a solid buy now.
How Does Transportadora de Gas del Sur S.A. (TGS) Stack Up Against its Peers?
While TGS has an overall POWR Rating of A, one might consider looking at its industry peers, OMV Aktiengesellschaft (OMVKY) and Eni S.p.A. (E), which also have an overall A (Strong Buy) rating.
TGS shares were trading at $6.33 per share on Wednesday morning, up $0.04 (+0.64%). Year-to-date, TGS has gained 42.57%, versus a -9.77% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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