OII - Valens Credit Report - 2024 05 10
Credit markets are slightly overstating credit risk with a YTW of 6.510% relative to an Intrinsic YTW of 6.090% and an Intrinsic CDS of 160bps. Meanwhile, credit markets are overstating the firm's fundamental credit risk, with its Ba2 credit rating four notches lower than Valens' IG4+ (Baa1) credit rating.Incentives Dictate Behavior™ analysis highlights mostly positive signals for credit holders. Management's compensation framework should incentivize them to improve all three value drivers: sales, margins, and asset utilization, which should drive Uniform ROA improvement and lead to increased cash flows available for servicing debt obligations going forward. In addition, most management are material owners of OII equity relative to their annual compensation, indicating they may be aligned with shareholders to pursue long-term value creation for the company.
Earnings Call Forensics™ analysis of the firm's Q1 2024 (04/25/2024) earnings call highlights that management is confident they expect significantly higher revenue and operating results for the segment in Q2.
Oceaneering International is a provider of engineered services and products, primarily to the offshore oil and gas industry. The company's segments are: Energy Services and Products; and Advanced Technologies. The company's business segments within the Energy Services and Products business are remotely operated vehicles, subsea products, subsea projects and asset integrity. The company's Advanced Technologies segment consists of government; and commercial business units: Government services and products include engineering and related manufacturing in defense and space exploration activities. The company's commercial business unit provides a turnkey solution that includes program management, and engineering design.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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