Momentum Stock Watch: Frontline Ltd. (FRO)

Company Profile:

Frontline Ltd. is a shipping company. The Company is engaged in the ownership and operation of oil tankers. The Company operates oil tankers of two sizes: very large crude carriers (VLCCs), which are between 200,000 and 320,000 deadweight tons, and Suezmax tankers, which are vessels between 120,000 and 170,000 deadweight tons. The Company operates through subsidiaries and partnerships located in the Bahamas, Bermuda, the Cayman Islands, India, the Isle of Man, Liberia, Norway, the United Kingdom and Singapore. It is also involved in the charter, purchase and sale of vessels. As of December 31, 2014, the Company’s tanker fleet consisted of 22 vessels and consists of 14 VLCCs (excluding the four vessels in the Windsor group) and eight Suezmax tankers, of which one Suezmax, Front Ull, is owned and the remaining 21 are chartered in.

Recent News:

Frontline’s 3Q15 revenue was 25% higher than the Wall Street estimate of $97 million. Wall Street analysts are estimating that Frontline’s revenue for 2016 will be $689 million, compared to $535 million in revenue for the past four months.

On Nov. 16, 2015, Frontline Ltd. and Frontline 2012 Ltd. have entered into an agreement and plan of merger, pursuant to which the two companies have agreed to enter into a merger transaction, with Frontline as the surviving legal entity and Frontline 2012 becoming a wholly-owned subsidiary of Frontline.

In its 3Q15 earnings call, Frontline (FRO) said that once shareholders approve the merger of Frontline and Frontline 2012 and the merger is completed, the company will start paying dividends to its shareholders.

Fundamental Analysis:

Ninestocks analyzes several different financial aspects: Growth, Profitability, solvency and efficiency.

Growth – Measures the growth of both the company’s income statement and cash flow.

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Profitability – Measures the historical price movement of the stock.

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Solvency – Measures the solvency of the company based on several ratios.

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Efficiency – Measures the strength and historic growth of a company’s return on invested capital.

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Conclusion:

FRO’s strengths can be seen in its better growth and strong profitability. Technical indicators signal the bullish signs, as there is a bullish cross in Stochastic Oscillator. RSI is increasing to 52.47. The current P/E ratio indicates it is undervalued compared to the average P/E ratio of the industry and the sector. We rate Frontline Ltd. (FRO) a BUY.