Oceaneering International: Undervalued by 42%?

Oceaneering International's estimated fair value is $38.79 based on a 2-stage free cash flow to equity model. The company's current share price of $22.36 suggests a 42% undervaluation. Analyst price target for OII is $21.13, which is 46% below the fair value estimate.

Title: Oceaneering International: A Deep Dive into Valuation and Market Outlook

Oceaneering International (NYSE: OII) has been a subject of interest for investors due to its diversified offshore services and subsea robotics capabilities. As of July 2, 2025, the company's stock is trading at $22.36, with analysts projecting a price target of $21.13. This article aims to provide a detailed analysis of Oceaneering International's valuation, based on a 2-stage free cash flow to equity model, and its market outlook.

# Estimated Fair Value

According to a 2-stage free cash flow to equity model, Oceaneering International's estimated fair value is $38.79. This valuation method considers both short-term and long-term cash flows, providing a comprehensive view of the company's intrinsic value. The model suggests that the company is currently undervalued, trading at a 42% discount to its estimated fair value.

# Analyst Price Target

Analysts have set a price target of $21.13 for Oceaneering International, which is 46% below the fair value estimate of $38.79. This discrepancy highlights a significant gap between the company's estimated intrinsic value and the market's consensus view. The analysts' price target, however, is not far from the current share price of $22.36, indicating a moderate level of optimism.

# Market Outlook

Oceaneering International's outlook is driven by stable offshore activity and strong backlog execution. The company's subsea robotics and OPG segments are expected to benefit from high utilization and pricing. The Manufactured Products segment, while facing weak bookings in H1, is expected to see improved margin throughput in H2 due to backlog conversion. The OPG segment's vessel utilization is projected to remain solid in Q3 but may shift toward lower-margin IMR work in Q4. IMDS and defense-related services are set to grow gradually, with limited near-term upside.

# Financial Performance

As reported in the Q2 2025 earnings report, Oceaneering International's Subsea Robotics segment saw stable demand and strong pricing, leading to a 6% revenue rise from Q1 to Q2. The OPG segment, despite higher vessel utilization, saw 9% lower revenues. The Manufactured Products segment benefited from backlog conversion, resulting in an 8% quarter-over-quarter revenue rise. The IMDS segment showed modest sales growth, while the Aerospace and Defense Technologies segment recorded the sharpest revenue rise due to early-stage defense contract activity.

# Valuation Metrics

Oceaneering International's current EV/EBITDA multiple of 6.2x is lower than its five-year average of 14.1x, suggesting that the stock may be undervalued compared to its historical performance. The stock price has increased by 5% since the last publication in June 2024, indicating a moderate level of investor confidence.

# Recommendation

Given the significant undervaluation and stable market outlook, investors may find Oceaneering International an attractive investment opportunity. However, the company's margin pressure and negative cash flows warrant caution. The stock is mildly overvalued versus its peers, and a gradual recovery throughout the year is expected. Therefore, a "hold" recommendation is appropriate for now.

# References

[1] https://seekingalpha.com/article/4812085-oceaneering-international-stock-offshore-tailwinds-meet-onshore-pressures-hold