Natural gas prices have been on an absolute slide for years, continuing to defy gravity and move ever-lower, driving many investors who have dipped their toes in the gas markets crazy. This has slashed valuations across the sector, and has provided an interesting opportunity to potentially pick up some high quality companies at a very reasonable discounted rate.
One such company I like today is Tidewater Midstream (TSX:TWM) As the company’s name suggests, Tidewater focuses on midstream assets in the natural gas space.
While I do think that natural gas prices will continue to wane, hurting natural gas producers, midstream and downstream companies like Tidewater should be relatively insulated from commodity prices over the long-term, removing a lot of the commodity risk with a play like this.
Fundamentally, Tidewater is a well-run company, and has a decent balance sheet at this point in time; the company did have to take on debt to acquire a refinery in Prince George, B.C., but has solid top and bottom line numbers with very good long-term growth prospects supported by its underlying assets.
Right now, Tidewater remains a small cap company, meaning fewer investor eyeballs are on this company, providing a situation where some market mispricing can happen from time to time. With a current valuation hovering around five-times this year’s EBITDA, Tidewater remains undervalued in my book, with at least 25% of near-term upside not being pried in by the overall market today.
Invest wisely, my friends.
