Bristow Group’s 22.8% return over the past six months has outpaced the S&P 500 by 17%, and its stock price has climbed to $47.58 per share. This performance may have investors wondering how to approach the situation.
Is now the time to buy Bristow Group, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Why Do We Think Bristow Group Will Underperform?
We’re glad investors have benefited from the price increase, but we're swiping left on Bristow Group for now. Here are three reasons we avoid VTOL and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
Cyclical industries such as Energy can make mediocre companies look great for a time, but a long-term view reveals which businesses can actually withstand and adapt to changing conditions. Over the last five years, Bristow Group grew its sales at a sluggish 5.7% compounded annual growth rate. This was below our standard for the energy upstream and integrated energy sector.
2. Fewer Distribution Channels Limit its Ceiling
The scale of a company’s revenue base is an important lens through which to view the topline, as it signals whether a producer has gone from a vulnerable commodity taker into a durable operating platform. Larger producers generate revenue across many wells, pads, takeaway routes, and geographies rather than relying on a single field or drilling program.
Bristow Group’s $1.49 billion of revenue in the last year is pretty small for the industry, suggesting the company is subscale business in an industry where scale matters.
3. Breakeven Free Cash Flow Limits Reinvestment Potential
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
Bristow Group broke even from a free cash flow perspective over the last five years, giving the company limited opportunities to return capital to shareholders.
Final Judgment
Bristow Group falls short of our quality standards. With its shares outperforming the market lately, the stock trades at 8.9× forward P/E (or $47.58 per share). While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are more exciting stocks to buy at the moment. We’d recommend looking at an all-weather company that owns household favorite Taco Bell.
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