Tudor Perini is a ‘Net / Net’ candidate
Jonathan Heller from Real Money is busy running portfolio screens and he is focusing on construction heavyweight Tutor Perini (PTC) – Get the report from Tutor Perini Corporation. He calls this an “interesting situation”.
“Guardian Perini, who is a member of my 2021 Dual Net Worth Portfolio, has seen his valuation reach a new level,” Heller wrote recently on Real Money. “The construction company’s shares have been stable since the start of the year and it is now a ‘net / net’, trading below the current net asset value.”
It’s been a while since Heller wrote on net / nets due to their rarity, so he provided Real Money readers with a mini-update.
“A ‘net / net’ is a business that trades below its current net asset value, or NCAV, which is calculated by subtracting total liabilities from current assets,” he said. “The designation is based on a technique developed by Benjamin Graham many years ago, although his investment criteria are more stringent. Graham would only consider stocks trading below 2/3 NCAV, but in the over 20 years that I have researched, written, and invested in the net / net, I have used the most relaxed methodology.
Heller notes that the calculation ignores non-current assets in the calculation; a buyer gets them theoretically for free. “Theoretically”, however, is the key word. Nets / nets are often the proverbial ‘flea dog’ of the investment world, ”he said.
With a market cap of $ 663 million, Tutor Perini is the largest net / net Heller seen “in ages” and its shares are currently trading at 0.96X NCAV. Tutor Perini ended its final quarter with $ 231 million in cash and $ 970 million in debt. “The bulk of its current assets, $ 3.4 billion, are receivables; in terms of net / net asset quality, I would rather see more cash and short-term investment, but beggars can’t choose, ”Heller added.
Tutor Perini is currently trading at just under 6 times rolling earnings per share and less than 6 times next year’s consensus estimates. “While there are only three analysts, that’s actually not a bad number for a net / net – most are so small they don’t get any coverage,” Heller said. “So hope is eternal for tutor Perini. It has been quite volatile amid speculation it could benefit from infrastructure spending, should it ever happen. “