Sometimes stocks will remain on my radar for years before I end up taking a bite. Such is the case for construction name Tutor Perini (TPC) , which has been a member of my Double Net Value Portfolio for each of the past three years. That, in and of itself says something, but on Friday I finally took a position in TPC
The idea behind that annual deep value tracking portfolio of which TPC seems to have become a perennial member, is to identify companies trading a low levels of net current asset value or NCAV (for this portfolio, between 1x and 2x NCAV). The theory is that such a low valuation will ultimately be recognized by investors, who will ultimately bid the name up. In fact, double-nets have been a very fertile hunting ground for acquisitions.
TPC, however, has been a different animal. Shares now trade at the same price they did in 2010. Over the years, TPC has popped from time to time, eclipsing $30/share in 2014, and again in 2017, but it has not been able to sustain those levels, and closed Friday at $16.49. Interestingly, and for perspective, the stock's closing low during the 2008/2009 meltdown was $12.49 on 11/20/2008, and by the following week it was back up to $19.
Attractive attributes of TPC include the fact that it currently trades at just 1.49x NCAV, and .7x tangible book value per share. Forward consensus earnings estimates of $2.22 for 2021 and $2.47 for 2022 imply forward price earnings ratios of about 7.5 and 6.5, respectively.
The other side to TPC, and what has likely held me back from taking a position previously has been the level of debt, which currently stands at just over $1 billion. Cash on the books at $348 million puts net debt at about $650 million which is still considerable, but fairly consistent with the company's normal level of net debt over the past several years.
What has finally gotten me off the sidelines with TPC are the prospects for massive amounts of infrastructure spending in the next couple of years. I may be a bit late to the party on this one. TPC shares traded below $3 briefly at the outset of the pandemic. Could have, should have, would have...
One thing, however, is clear to me about TPC: This is not a buy and hold name. This is one to trade.