Frontline plc (FRO): what the price requires
At today's price, Frontline plc (FRO) is priced for -0.5% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-19 · Source: https://boothcheck.com/report/FRO
Headline
| Field | Value |
|---|---|
| Ticker | FRO |
| Company | Frontline plc |
| Current price | $37.14/sh |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Implied growth | -0.5% |
| Multiple paid | 18x operating income |
Solve inputs: computed at a 7.3% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~7.5pp.
Reconcile: at the x-ray's 9.3% required return this reads ~13.1%/yr; the models below use their own rates.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | -0.59σ |
| cohort percentile (of 225 peers) | 34 |
| implied end-window share | 0% |
Valuation X-Ray
Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 1.79x | 5 | expensive |
| Earnings | 1.88x | 4 | expensive |
| Relative | 1.56x | 5 | expensive |
| Growth | 0.65x | 4 | justifies |
Families that justify the price: Growth Families that call it expensive: Asset, Earnings, Relative
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 9.0%); the inversion above states its own rate.
Per-Model Detail (n=18)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $119.23 | 0.31x | yes | FCF base $0.7B, growth 25% (input: historical growth), terminal g 4.0%, WACC 9.0%, 7yr projection |
| DCF Exit Multiple | Growth | $61.69 | 0.60x | yes | Exit EV/EBITDA: 15.0x / 18.0x / 21.0x (bear / base = today's held flat / bull), 7yr |
| Relative Valuation | Relative | $32.28 | 1.15x | yes | P/E 20x (static sector reference · 2026-04), scenarios: 16.0x / 20.0x / 24.0x (bear / base = reference held flat / bull), EV/EBITDA 13x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | $32.98 | 1.13x | yes | Stage 1: 20% for 5yr, Stage 2: 3.5% perpetual |
| Simple Excess Return | Asset | $18.41 | 2.02x | yes | BV/sh $11.28, ROE (TTM) 15.1%, ke 9.3% |
| Two-Stage Excess Return | Asset | $23.24 | 1.60x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $53.89 | 0.69x | yes | Rev $2.0B, growth 30% (input: historical growth; tapered), Terminal P/S: 3.4x / 4.2x / 5.0x (bear / base = today's held flat / bull, cap 12x) |
| Peter Lynch Fair Value | Relative | $20.40 | 1.82x | yes | EPS $1.70, growth 2% (input: historical EPS growth), PEG=10.90 (Overvalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $14.11 | 2.63x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.52B × (1−2%) / WACC 9.0% → EPV (no growth) |
| Residual Income | Asset | $23.82 | 1.56x | yes | BV $11.28 + 5yr PV of (ROE (TTM) 15.1% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $20.77 | 1.79x | yes | √(22.5 × EPS $1.70 × BVPS $11.28) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $23.75 | 1.56x | yes | EBITDA $0.60B × sector EV/EBITDA 13.0x |
| FCF Yield | Earnings | $21.32 | 1.74x | yes | FCF $669.9M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | — | — | no | — |
| Ben Graham Formula | Earnings | $54.85 | 0.68x | yes | EPS $1.70 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $14.71 | 2.52x | yes | BV $11.28 × (ROIC 11.8% / WACC 9.0%) |
| P/Sales Sector | Relative | $17.71 | 2.10x | yes | Revenue $1.97B × sector P/S 2.0x |
| PEG Fair Value | Relative | $63.75 | 0.58x | yes | EPS $1.70 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x |
| Earnings Yield | Earnings | $18.38 | 2.02x | yes | EPS $1.70 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $2.5b |
| Net debt / NOPAT (after-tax) | 4.23x |
| Net debt / operating income (pre-tax) | 4.17x |
| Share count CAGR (dilution) | 2.8% |
| Burning cash | no |
Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.
Bullet Takeaways
- Frontline runs one of the world's large fleets of crude oil tankers, and the most recent quarter was its strongest adjusted profit in roughly two decades, with revenue up 67% year over year to $714.2 million as Middle East trade disruption pushed daily tanker rates sharply higher.
- The central risk is that these earnings are a cyclical peak, not a run-rate: spot rates that drive the profit are set day to day in a notoriously volatile market, and the methods that capitalize trailing earnings already read the price as more than double what they support.
- Watch freight rates and the Strait of Hormuz situation, since the rate surge that produced the record quarter, and the $1.55 quarterly dividend it funded, depends on conditions that can reverse quickly.
Bull Case
What the standard valuation models miss about a tanker company is that its earnings power is not a smooth line, it is a switch. When the fleet is needed, daily charter rates can multiply several times over within a quarter, and a company that owns its vessels and runs them lean converts that directly into cash. Frontline just demonstrated it. The first quarter of 2026 produced net profit of $559.1 million, or $2.51 per share, the strongest adjusted result the company has posted in roughly twenty years, on revenue up 67% year over year to $714.2 million. A model that capitalizes a trailing average of operating income treats this as an anomaly to be smoothed away. For the owner of the ships, it is the whole point of owning them.
The driver is real and physical. Daily earnings reached about $103,500 for the largest crude carriers, $72,400 for Suezmax vessels, and $50,700 for the smaller product tankers, as disruption around Middle East trade routes lengthened voyages and tightened available capacity. Longer voyages mean the same cargo ties up a ship for more days, which is the same as removing ships from the market. When supply tightens against inelastic oil demand, rates spike, and a fleet owner with vessels on the water captures it. Frontline's forward bookings show the strength continuing into the second quarter, with a large share of its large-carrier days already booked at rates well above the first quarter's averages.
Management is treating the windfall the right way: returning it and pruning the fleet. The board declared a dividend of $1.55 per share for the quarter, and the company sold eight older large crude carriers, contributing $210.9 million to earnings and removing aging, less efficient capacity. Selling high-priced ships into a strong asset market and paying out the cash is exactly the discipline a cyclical owner should show at the top of a cycle. The bull case is that the tanker market stays structurally tight, on constrained newbuild supply and persistent trade-route disruption, long enough for the dividends to add up to a meaningful share of today's price before the cycle turns.
Bear Case
Read the methods honestly and the conservative ones are almost certainly telling the truer story. Nearly every valuation family that anchors on what the business has actually earned says Frontline is richly priced. The asset-based methods, built from a book value near $11.28 per share, land roughly half the current price. The earnings-power methods, which capitalize trailing or normalized operating income, sit even lower, reading the price at more than double their estimate. The peer-multiple methods agree the price is full. Only the forward-growth discounted cash-flow methods reach the price, and they do so by extrapolating the recent surge: assuming 25% to 30% growth and holding it. That is the entire bet, and for a tanker company it is a fragile one.
The reason the conservative methods are the honest read is the nature of the business. Tanker rates are a spot market. The $103,500 daily rate that powered the record quarter is not a contract, it is a price that resets continuously and has historically collapsed as fast as it rose when disruptions ease or new vessels enter service. The company's own normalized operating income, averaged across the cycle rather than measured at the peak, points to a mid-cycle margin closer to 24% than the roughly 35% the trailing figures show. Capitalizing the peak as if it were permanent is the classic error in cyclical investing, and the forward-growth model that reaches the price is doing exactly that. The reliability of any single point estimate here is genuinely low precisely because the earnings stream is so volatile.
The balance sheet adds caution rather than comfort. Frontline carries net debt of about $2.5 billion, and interest coverage of roughly 2.4 times trailing operating income is adequate at peak earnings but thin if rates revert. A capital-intensive shipping company servicing that debt out of a volatile cash stream has limited room for a prolonged downturn, and the generous dividend competes with the debt for the same cash. The structural truth is that you are buying a high-quality fleet at a moment when its earnings are extraordinary, and the price is asking you to believe the extraordinary is the new ordinary. The methods that decline to make that assumption are the ones worth listening to.
Valuation
The price is a bet on the durability of a freight-rate spike, and the methods disagree sharply about whether that bet is sound. Set against today's $40.94 (June 27, 2026), the asset-based, earnings-power, and peer-multiple methods all read the stock as richly valued. Only the forward-growth discounted cash-flow methods reach the price, and they get there by crediting the recent growth and projecting it forward. For most companies, one family reaching the price is a sign of optionality the static methods cannot frame. For a cyclical shipping company, it is more likely a sign that the static methods are correctly refusing to capitalize a peak.
The spread is the information. Book value plus profitability lands near $18 to $24 per share, capitalized trailing earnings near $18, and a sector earnings multiple near $32, all below the current price. The growth methods reach into the $60s and higher, but only on assumptions of 25% to 30% sustained growth that the structure of the tanker market makes implausible across a full cycle. The honest framing is that the price sits well above what the business earns on average and well below what it earns at the top, and the gap between those two is the cyclicality the buyer is underwriting. The current operating margin near 35% is a peak figure; the through-cycle margin is closer to the mid-20s, and which one the future resembles determines whether the price is cheap or expensive.
Solvency keeps the picture grounded. Frontline carries net debt of roughly $2.5 billion against a fleet that generates strong cash today, with interest coverage near 2.4 times. That is serviceable while rates are high, but the coverage compresses quickly if the spot market reverts, and the $1.55 quarterly dividend draws on the same cash that services the debt. The decisive variable is not any single fair-value estimate, which for a business this volatile is inherently unreliable, but the level and persistence of freight rates from here. The price assumes they stay near the top.
Catalysts
Frontline reported first-quarter 2026 results on May 22, posting net profit of $559.1 million, or $2.51 per share, with adjusted earnings of $344.9 million, or $1.55 per share, on revenue up 67% year over year to $714.2 million. The company described it as its strongest adjusted profit in roughly two decades, driven by disruption to Middle East trade routes that lifted tanker rates. The board declared a dividend of $1.55 per share for the quarter.
The operating detail shows where the money came from. Average daily earnings reached about $103,500 for very large crude carriers, $72,400 for Suezmax vessels, and $50,700 for the LR2 and Aframax class. Forward bookings pointed to continued strength into the second quarter, with a large majority of large-carrier days already booked at daily rates well above the first quarter's levels. The company also sold eight older very large crude carriers, adding $210.9 million to the quarter's earnings and trimming aging capacity from the fleet.
The catalysts to watch are entirely rate-driven. The ongoing closure or disruption of the Strait of Hormuz, which affects a meaningful share of global crude exports, is the proximate cause of the rate surge, and any easing or escalation there moves Frontline's earnings directly. Beyond the geopolitics, the trajectory of newbuild deliveries and global oil trade volumes sets the supply-demand balance that determines whether the current rate environment holds. The next earnings report will show how much of the second-quarter booking strength converted to realized results.
Peer Cohorts (Per Segment, With Filing Citations)
Core business (reported)
- TNK (TEEKAY TANKERS LTD.)
- (no filing in the citation store)
- SBLK (STAR BULK CARRIERS CORP.)
- FY2025 20-F: · management of our accounting system and records and financial reporting; · administration of the legal and regulatory requirements affecting our business and assets; and · management of the relationships with our service providers and customers. The principal factors that affect our profitability, cash flows and…
- FY2025 20-F: …and varies according to their supply and demand. We compete with other owners of dry bulk carriers in the Newcastlemax, Capesize, Post Panamax, Kamsarmax, Panamax, Ultramax and Supramax size sectors. Ownership of dry bulk carriers is highly fragmented. We compete for charters on the basis of price, vessel location,…
- GSL (Global Ship Lease, Inc.)
- FY2025 20-F: …presented for each category of participating common shares under the two-class method. (w) Risks Associated with Concentration The Company is exposed to certain concentration risks that may adversely affect the Company's financial position in the near term: (i) The Company derives its revenue from liner companies…
- FY2025 20-F: 4 Table of Contents We will face substantial competition in expanding our business from a number of companies. Many of these competitors may have greater financial resources and a lower cost of capital than us, may operate larger fleets, may have been established for longer, and may be able to offer better charter…
- DAC (DANAOS CORPORATION)
- (no filing in the citation store)
- CMRE (COSTAMARE INC.)
- FY2025 20-F: …can be more difficult to employ them on profitable time charters, particularly during periods of decreased demand in the charter market. Accordingly, we may find it difficult to continue to find profitable employment for our vessels as they age. 15 Table of Contents We face substantial competition from a number of…
- FY2025 20-F: …competition in both sectors. Participants in the container shipping industry include "liner" shipping companies, which operate container shipping services and own containerships, containership owners, often known as "charter owners", who own containerships and charter them out to liner companies, and shippers who…
- SFL (SFL Corporation Ltd.)
- FY2025 20-F: …are self-propelled, and can therefore easily move between geographic areas. Jack-up drilling rigs are not self-propelled, but it is common to move these assets over long distances on heavy-lift vessels. Therefore, the markets and competition for these rigs are effectively world-wide. Competition for charters in all…
- FY2025 20-F: …the international shipping and offshore drilling industries, types, sizes, sophistication and ages of vessels and drilling rigs, supply and demand for vessels and drilling rigs, availability of or developments in other modes of transportation, competition from other shipping companies, cost of newbuildings,…
- FLNG (FLEX LNG Ltd.)
- FY2025 20-F: …and depressed freight rates, may severely affect the financial condition of charterers, and their ability to make charter payments, which could result in a material increase in the credit and counterparty risks to which we are exposed to and our ability to re-charter our vessels at competitive rates. If any of our…
- FY2025 20-F: …segment: vessel operations. The vessel operations segment relates to revenue generated from chartering of vessels to customers. Although separate vessel financial information is available, the CODM internally evaluates the performance of the Company as a whole and not on the basis of each vessel or charters. In…
- GLNG (Golar LNG Limited)
- FY2025 20-F: …rises in colder weather and declines in warmer weather. Seasonal demand during the summer months has increased in certain markets due to energy requirements for air conditioning and, in some regions, reduced availability of hydropower generation. Certain of our tolling arrangements include both fixed capacity…
- FY2025 20-F: …condition. ◦ Risks related to our industry ■ Our results of operations and financial condition depend on demand for natural gas, LNG and FLNGs; ■ Our operations face several industry risks and events which could cause damage or loss of a vessel, loss of life or environmental consequences that could harm our…
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.
Sources
Q1 2026 results, May 2026 · Q1 2026 results release, May 2026