What a fantastic six months it’s been for Tenaris. Shares of the company have skyrocketed 71.7%, hitting $43.71. This was partly thanks to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Is there a buying opportunity in Tenaris, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Why Is Tenaris Not Exciting?
Despite the momentum, we don't have much confidence in Tenaris. Here are two reasons we avoid TEN and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
A company’s long-term performance can give signals about its business quality. Even a bad business, especially in a cyclical industry, can shine for a year or so, but a top-tier one should exhibit resilience through cycles. Over the last five years, Tenaris grew its sales at a sluggish 4.4% compounded annual growth rate. This was below our standard 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 $798.7 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 isn’t one of our picks. After the recent surge, the stock trades at 5.6× forward P/E (or $43.71 per share). This valuation multiple is fair, but we don’t have much faith in the company. We're fairly confident there are better investments elsewhere. Let us point you toward our favorite semiconductor picks and shovels play.
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