Down More Than 80% in the Past Year, is Now a Good Time to Scoop Up Shares of Team Inc.?

Team, Inc. (TISI) in Sugar Land, Tex., provides integrated and digitally-enabled asset performance assurance and optimization solutions in more than 20 countries. It operates through three segments: Inspection and Heat Treating (IHT); Mechanical Services (MS); and Quest Integrity.

Shares of TISI have retreated 89.3% in price over the past year to close Friday’s trading session at $1.02. The bearish investor sentiment can be attributed to management comments regarding TISI’s ability to operate as a going concern and its poor financials.

Here’s what could shape TISI’s performance in the near term:

Poor Financials

In its latest quarterly earnings report, TISI stated that it failed to meet the consensus estimates due to several operational and macroeconomic headwinds. The company was adversely affected by weather disruptions and power outages due to Hurricane Ida, inflationary pressures, and uneven market dynamics. Rising costs of raw materials and transportation and labor shortages caused TISI’s margins to decline significantly in its last reported quarter, ended Sept. 30, 2021. Also, the company reported a decline in higher-margin service lines and overall activity.

TISI’s total revenues declined marginally year-over-year to $101.48 million in its fiscal third quarter, ended Sept. 30, 2021. This can be attributed to a 5.7% year-over-year decline in Quest Integrity revenues and a 5.2% year-over-year decline in MS revenues. Its gross margin slumped 16.3% from the prior-year quarter to $53.30 million. And its operating loss came in at $70.53 million, compared to $2.30 million in  operating income reported for the  same period last year. Its net loss worsened by 905% from its  year-ago value to $91.18 million. And its loss per share widened 880% from the same period last year to $2.94.

Going Concern Operations

TISI has expressed concerns regarding its ability to operate as a going concern in the current year due to limited borrowing capacity and cash balances. In its latest quarterly earnings report, the company stated that recurring losses and reduced operations had put pressure on its near-term liquidity needs. Furthermore, its tight borrowing capacity is expected to limit its working capital funds, resulting in reduced operations.

TISI’s obligations due within 12 months from Nov. 12, 2021, seemingly outweigh its current financial condition and liquidity sources, including current cash balances and forecasted cash flows, thereby raising concerns regarding its ability to continue as a going concern.

POWR Ratings Reflect Bleak Prospects

TISI has an overall D rating, which equates to Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

TISI has a D grade for Stability and Sentiment. The stock’s relatively high 1.99 beta is in sync with the Stability grade. In addition, analysts expect TISI’s EPS to remain negative until at least this year, justifying the Sentiment grade.

Among the 91 stocks in the B-rated Industrial – Services industry, TISI is ranked #84.

Beyond what I have stated above, view TISI ratings for Momentum, Quality, Growth, and Value here.

Bottom Line

On February 4, TISI received written notice from the NYSE that it is not in compliance with the continuing listing standards because its average closing share price has not been at least $1 over the past 30 days. According to the NYSE listing rules, TISI has six months to regain compliance. TISI is currently trading below its 50-day and 200-day moving averages of $0.95 and $3.87, indicating a downtrend. Thus, we think the stock is best avoided now.

How Does Team, Inc. (TISI) Stack Up Against its Peers?

While TISI has a D rating in our proprietary rating system, one might want to consider looking at its industry peers Barloworld Ltd. (BRRAY), EMCOR Group, Inc. (EME), PT United Tractors Tbk (PUTKY), which have an A (Strong Buy) rating.

TISI shares were trading at $0.92 per share on Tuesday morning, down $0.10 (-9.61%). Year-to-date, TISI has declined -15.60%, versus a -8.61% rise in the benchmark S&P 500 index during the same period.

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities.

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