Should You Buy It? Tidewater Rising

Shares of Tidewater(TDW Quote - Cramer on TDW - Stock Picks) have fallen upon rough times lately. At Wednesday's closing price of $53.80, the stock is 15% higher than its January lows, but still 33% off its 52-week high.

The company operates a fleet of about 460 boats that transport personnel and supplies to help construct and maintain offshore oil rigs. Tidewater generates the majority of its sales overseas. In fact, some 88% of its fleet is positioned in emerging markets outside of the Gulf of Mexico and the North Sea.

The stock has received two analyst upgrades in the past few weeks. Still, at current levels, Tidewater is valued at just 8.1 times expected fiscal 2008 (ending March) earnings of $6.61 a share. This is the lowest valuation the stock has seen since 2000 -- when oil was going for about $30 a barrel, relative to Wednesday's closing price of $93.27.

One of my primary roles here at TheStreet.com is to evaluate stocks like Tidewater for the Value Investor service that I manage. (Click here to take free trial.) Keeping with that mission, let's take a serious look at Tidewater. Should you buy shares in the company now, or is the prudent move to wait for a further decline?

Tidewater announced mixed fiscal third quarter (ended December) results Feb. 1. The company earned $1.66 a share, which was 14 cents ahead of the consensus analyst estimate. Revenue grew 9% year over year to $314.2 million, but fell $3.5 million short of expectations.

Average day rates for deepwater vessels rose 4.5% sequentially during the most recent quarter, to $24,612, operating at 91.2% of capacity, as higher international prices offset declining rates in the U.S. Rising demand for offshore vessels continues to outstrip supply, especially because only 140 of 200 expected new ships industrywide actually hit the waters in 2007, because of building delays.

Tidewater itself has 43 new vessels under construction, and already has the financing in place to fund these purchases. The company also has a clean balance sheet, with a relatively low total debt-to-equity ratio of 18%, and has been using its excess cash flow to buy back stock.

The company repurchased $116 million (2.3 million shares) worth of stock in the most recent quarter and added $50 million to its buyback program last month. Management is now authorized to repurchase up to $77.5 million (1.45 million shares) of its stock through June.

Tidewater also pays a 15-cent quarterly dividend (1.1% yield), and investors at the close of trading Feb. 28 will qualify for the upcoming March 14 payment.

So yes, I do believe that Tidewater is attractive to purchase now at current levels. The stock is trading at its lowest valuation in several years, even though the company is carrying a lot of momentum into calendar 2008 by buying back shares.

Tidewater shares could trade up to the mid-$60s over the coming quarters, as management continues to deliver on its targets. Tidewater is not part of The Street.com Value Investor newsletter or The Dividend Stock Advisor , two services managed by David Peltier. Mr. Peltier routinely writes about value stocks, such as General Motors(GM Quote - Cramer on GM - Stock Picks), Home Depot(HD Quote - Cramer on HD - Stock Picks) and AmeriCredit(ACF Quote - Cramer on ACF - Stock Picks) for TheStreet.com.