The past six months have been a windfall for Tenaris’s shareholders. The company’s stock price has jumped 49.1%, hitting $38.80 per share. This was partly due to its solid quarterly results, and the run-up might have investors contemplating their next move.
Is there a buying opportunity in Tenaris, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Is Tenaris Not Exciting?
We’re glad investors have benefited from the price increase, but we don’t have much confidence in Tenaris. Here are two reasons you should be careful with TEN, plus one stock we’d rather own.
1. Long-Term Revenue Growth Disappoints
Cyclical sectors like Energy often flatter weaker operators during favorable price environments, but a longer-term lens separates those from businesses that can consistently perform across market cycles. Over the last five years, Tenaris grew its sales at a tepid 7.2% compounded annual growth rate. This fell short of our benchmark for the energy upstream and integrated energy sector.
2. Fewer Distribution Channels Limit Its Ceiling
In Energy, scale separates fragile single-asset producers from platform-style businesses that generate revenue across entire basins and infrastructure networks.
Tenaris’s $854.6 million of revenue in the last year is pretty small for the industry, suggesting the company hasn’t hit a level of diversification where investors can sleep easy at night.
Final Judgment
Tenaris isn’t a terrible business, but it doesn’t pass our quality test. Following the recent surge, the stock trades at $38.80 per share (or a trailing 12-month price-to-sales ratio of 1.4×). The market typically values companies like Tenaris based on their anticipated profits for the next 12 months, but there aren’t enough published estimates to arrive at a reliable number. You should avoid this stock for now - better opportunities lie elsewhere. We’d suggest looking at one of our top software and edge computing picks.
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