Nordic American Tankers vs. ZIM Integrated: Which Shipping Stock is a Better Buy?

Headquartered in Haifa, Israel, ZIM Integrated Shipping Services Ltd. (ZIM) provides international container shipping and related services. The company offers seaborne transportation and logistics services. In comparison, based in Hamilton, Bermuda, Nordic American Tankers Limited (NAT) is a tanker company that acquires and charters double-hull tankers internationally. It operates a fleet of 25 Suezmax crude oil tankers.

A significant supply and demand imbalance, which is being exacerbated by continuing global supply chain disruptions, has been beneficial for most shipping operators. Furthermore, record freight rates due to a lack of containerships, congestion in ports, and international demand for manufactured goods, are helping shipping companies expand their profit margins. Rapid digitization, automation in logistics, and growing cargo shipping services across industries are expected to drive the growth of the shipping market. According to a report by Market Research Future, the cargo shipping market is expected to grow at a 5.2% CAGR through 2030. Therefore, both ZIM and NAT should benefit.

ZIM’s shares have gained 20.7% in price over the past three months, while NAT has negative returns. Also, ZIM’s 58% gains over the past six months compare to NAT’s negative returns. Furthermore, ZIM is the clear winner with 229.8% gains versus NAT’s negative returns in terms of the past year’s performance.

But which of these two stocks is a better buy now? Let’s find out.

Latest Developments

On Feb. 10, 2022, ZIM announced a new charter agreement with Navios Maritime Partners L.P., in which ZIM will charter a total of 13 container vessels comprising five secondhand vessels and eight new-build vessels for a total charter hire consideration of approximately $870 million. This transaction could further strengthen its core operating fleet and support its long-term growth strategy.

On Feb. 9, 2022, NAT concluded two six-year time charters for its two Suezmax new-buildings for delivery in May and June this year. Herbjorn Hansson, Founder, Chairman, and CEO of NAT, said, “Our business is expanding in the Middle East, which is an important area for our operations. We regard this cooperation with Oman interests as a substantial step forward to cementing and building out our position in the area. This may only be the beginning.”

Recent Financial Results

ZIM’s revenues increased 210% year-over-year to $3.14 billion for the fiscal third quarter, ended Sept. 30, 2021. The company’s adjusted EBITDA grew 693% year-over-year to $2.08 billion, while its net income came in at $1.46 billion, representing a 913% year-over-year increase. Also, its EPS was $12.16, up 794% year-over-year.

NAT’s net voyage revenues decreased 75% year-over-year to $9.31 million for its fiscal third quarter, ended Sept. 30, 2021. The company’s adjusted EBITDA loss came in at $12.27 million compared to $15.64 million in income in the prior-year quarter, while its net loss was $44.67 million, representing a 345.7% year-over-year increase. Also, its loss per share came in at $0.27, up 285.7% year-over-year.

Expected Financial Performance

Analysts expect ZIM’s revenue to increase 115.8% for the quarter ending March 31, 2022, but decrease 0.4% in its fiscal 2022. The company’s EPS is expected to grow 133.8% for the quarter ending March 31, 2022, but decline 23% in fiscal 2022.

In comparison, NAT’s revenue is expected to increase 80.8% for the quarter ending March 31, 2022, and 160.3% in fiscal 2022. Its EPS is expected to grow 71.9% for the quarter ending March 31, 2022, and 78.6% in fiscal 2022.

Profitability

ZIM’s $8.62 billion trailing-12-month revenue is significantly higher than NAT’s $182.25 million. ZIM is also more profitable, with gross profit  and net income margins of 57.40% and 38.27%, respectively, compared to NAT’s negative returns.

Furthermore, ZIM’s ROE, ROA, and ROTC of 214.73%, 51.32%, and 68.44%, respectively, compare to NAT’s negative values.

Valuation

In terms of trailing-12-month P/S, NAT is currently trading at 1.32x, which is 48.3% higher than ZIM’s 0.89x. Furthermore, NAT’s 3.35x trailing-12-month EV/S ratio is 249% higher than ZIM’s 0.96x.

So, ZIM is relatively affordable here.

POWR Ratings

ZIM has an overall A rating, which equates to a Strong Buy in our proprietary POWR Ratings system. In contrast, NAT has an overall rating of F, which translates to a Strong Sell. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

ZIM has a B grade for Value, consistent with its 0.78x forward EV/S, which is 57% lower than the 1.81x industry average. However, NAT has an F grade for Value, which is in sync with its 8.45x forward EV/S, which is 228.2% higher than the 2.57x industry average.

Moreover, ZIM has a grade of B for Quality. This is justified given ZIM's 1.72% trailing-12-month asset turnover ratio, which is 117.8% higher than the 0.79% industry average. In comparsion,  NAT has a Quality grade of D, which is in sync with its 0.19% trailing-12-month asset turnover ratio, which is 54.8% lower than the 0.42% industry average.

Among the 45 stocks in the Shipping industry, ZIM is ranked #3. In comparison, NAT is ranked #45.

Beyond what I have stated above, we have also rated the stocks for Growth, Sentiment, Momentum, and Stability. Click here to view all the ZIM ratings. Also, get all the NAT ratings here.

The Winner

The shipping industry is expected to grow rapidly with increasing demand this year and beyond. While both ZIM and NAT are expected to gain, we think it is better to bet on ZIM now because of its lower valuation and higher profitability.

Our research shows that odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the other top-rated stocks in the Shipping industry here.

ZIM shares rose $1.29 (+1.88%) in premarket trading Wednesday. Year-to-date, ZIM has gained 16.89%, versus a -9.56% rise in the benchmark S&P 500 index during the same period.

Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.

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