It's a rarity these days when another Real Money columnist and I write about the same stock, so I was pleased to see Paul Price's recent piece on construction name Tutor Perini (TPC) . It is not a well-known or well-followed name, but it's one that has been popping up on some of my deep value screens from time to time for a few years.
As Price notes, Tutor Perini has been extremely volatile. It qualified for my 2020 Double Net Value Portfolio, and was also a holdover from last year's version as well. That portfolio includes companies that trade between 1 and 2 times net current asset value (current assets minus current liabilities), which can represent a very cheap valuation.
With Tutor Perini continuing its volatile ways, shares are down 16% since the mid-December inception of the 2020 Double Net Value Portfolio; indeed, it is currently the worst performer in the portfolio. The falling stock price has pushed TPC into net/net land (companies trading below 1x net current asset value, or NCAV), and as of Thursday's close it traded at just 0.91x NCAV. Net/nets have become such a rarity that there currently are just three with market caps in excess of $100 million, with Tutor Perini the largest at $573 million.
Tutor Perini's volatility mainly has been due to a string of severe recent earnings misses, as it has missed consensus estimates in four of the past five quarters. More recently, there also is the potential weight of Dec. 20 announcement that Tutor Perini will take a $119 million after-tax charge due to a lawsuit. And there is its debt level, which stood at $836 million as of the end of the last quarter.
Tutor Perini's shares currently trade at just 4.6x next year's consensus estimates on revenue of $5.22 billion. Keep in mind that just three analysts currently cover Tutor Perini, but with the history of earnings misses the market seem to be pricing the shares accordingly.
Still, if you can put any faith in next year's estimates, Tutor Perini shares are very cheap. They also appear cheap on the basis of price to tangible book value, at just 0.46x.
One area where I agree with Paul Price is that TPC is one to trade. It is not a strong buy-and-hold candidate, which is atypical for this value investor. There is significant short interest in Tutor Perini as well; nearly 21% of the float is currently sold short.