The global supply chain disruption spread over the past few years is relatively well-known. Container freight rates spiked significantly over the past few years, but supply chain strains worldwide are easing.
Although the shipping industry faces the challenges of high inflation, slowing consumer demand, and high fuel costs, the sector has remained resilient as the demand for shipping services is relatively inelastic. Therefore, it could be wise for investors to buy cheap shipping stocks Dynagas LNG Partners LP (DLNG), StealthGas Inc. (GASS), and Castor Maritime Inc. (CTRM).
Before delving deeper into these stocks, let’s explore what’s happening in the shipping industry.
Thanks to the continued growth of international trade and the growing popularity of e-commerce, the demand for shipping services is expanding. Over the past few years, there has been an acute shortage of shipping containers amid rising demand for goods. Currently, the shipping industry is facing softening demand for goods and higher levels of inventories.
The Mediterranean Shipping Company (MSC) CEO Soren Toft believes the ocean container market will grow in the second half of 2023. The Swiss shipping firm is the world’s largest ocean freight line and is widely seen as a barometer for global trade.
Toft said, “I would say we are moderately optimistic that the world will resume again. I think when we come to the middle of this year, we’ll probably start seeing trade move. I would suspect when we get through the second quarter and into the middle of the year, we’ll start to see some positive signs.”
The global dry bulk shipping market is expected to expand at a CAGR of 5.4%, reaching $461.55 billion by 2028. Additionally, investors’ interest in shipping stocks is evident from the SonicShares Global Shipping ETF’s (BOAT) 22.4% returns over the past six months.
Given these factors, investors could buy cheap shipping stocks DLNG, GASS, and CTRM, currently trading under $3.
Let’s discuss their fundamentals.
Dynagas LNG Partners LP (DLNG)
Headquartered in Athens, Greece, DLNG operates in the seaborne transportation industry worldwide. The company owns and operates Liquefied Natural Gas (LNG) carriers.
In terms of the trailing-12-month EBIT margin, DLNG’s 34.44% is 60.7% higher than the 21.43% industry average. Its 41.02% net income margin is 200.9% higher than the 13.63% industry average. Likewise, its 58.59% trailing-12-month EBITDA margin is 77% higher than the industry average of 33.11%.
For the fiscal fourth quarter that ended December 31, 2022, DLNG’s voyage revenues stood at $35.06 million. Its adjusted net income came in at $6.98 million. Additionally, its adjusted EBITDA and adjusted EPS came in at $23.63 million and $0.11, respectively. Also, its vessel daily operating expenses declined 5% year-over-year to $14,060.
Analysts expect DLNG’s EPS and revenue for the quarter that ended March 31, 2023, to increase 10.5% and 1.2% year-over-year to $0.21 and $33.67 million, respectively. Over the past three months, the stock has gained 32.6% to close the last trading session at $2.85.
DLNG’s positive outlook is reflected in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Within the A-rated Shipping industry, it is ranked #15 out of 42 stocks. It has an A grade for Momentum and Sentiment and a B for Quality. We have also given DLNG grades for Growth, Value, and Stability. Get all DLNG ratings here.
StealthGas Inc. (GASS)
Based in Athens, Greece, GASS provides seaborne transportation services to Liquefied Petroleum Gas (LPG) producers and users internationally. It also provides crude oil and natural gas.
In terms of the trailing-12-month net income margin, GASS’ 22.42% is 64.5% higher than the 13.63% industry average. Its 11.72% levered FCF margin is 73.8% higher than the 6.74% industry average. Likewise, its 15.86% trailing-12-month CAPEX/Sales is 35.9% higher than the industry average of 11.67%.
For the fiscal fourth quarter that ended December 31, GASS’ revenues increased 18.5% from the prior-year quarter to $42.73 million. Its adjusted net income increased 275.5% year-over-year to $10.60 million.
The company’s adjusted EBITDA increased 37.3% from the prior-year quarter to $20.02 million. In addition, its adjusted EPS came in at $0.28, representing a 300% increase from the year-ago quarter.
Analysts expect GASS’ EPS and revenue for the fiscal year 2024 to increase 8.9% and 6.9% year-over-year to $0.86 and $156.90 million, respectively. It has an impressive earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters. Over the past six months, the stock has gained 2.3% to close the last trading session at $2.71.
It is no surprise that GASS has an overall rating of A, which translates to a Strong Buy in our POWR Ratings system. It is ranked #2 in the same industry. It has an A grade for Momentum and Sentiment and a B for Value and Quality.
Click here to access the additional ratings for GASS for Growth and Stability.
Castor Maritime Inc. (CTRM)
Based in Limassol, Cyprus, CTRM provides shipping services worldwide. The company operates through four segments: Dry Bulk Vessels; Aframax/LR2 Tanker; Handysize Tanker Vessels; and Containerships.
In terms of the trailing-12-month EBIT margin, CTRM’s 47.14% is 385.2% higher than the 9.72% industry average. Its 45.23% trailing-12-month net income margin is 596.4% higher than the 6.50% industry average. Likewise, its 29.15% trailing-12-month CAPEX/Sales is 921.7% higher than the industry average of 2.85%.
For the fiscal fourth quarter that ended December 31, 2022, CTRM’s total vessel revenues increased 15.5% year-over-year to $69.32 million. The company’s operating income increased 17.7% year-over-year to $35.94 million.
Its net income attributable to common shareholders increased 93.1% year-over-year to $33.68 million. Its EPS came in at $0.36, representing a 100% increase from the prior-year quarter.
Over the past three months, the stock has fallen 33.9% to close the last trading session at $0.69.
CTRM’s solid prospects are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system. It is ranked #6 in the Shipping industry. In addition, it has an A grade for Value and a B for Growth and Quality.
To see the other ratings of CTRM for Momentum, Stability, and Sentiment, click here.
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DLNG shares were trading at $3.05 per share on Wednesday afternoon, up $0.20 (+7.02%). Year-to-date, DLNG has gained 16.41%, versus a 5.01% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
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