Star Bulk Carriers Corporation (SBLK) and Castor Maritime Inc. (CTRM) are two prominent players in the marine shipping industry. SBLK is an Athens, Greece-based shipping company that provides ocean transportation for dry bulk cargoes and offers vessel management services worldwide. In comparison, Limassol, Cyprus-based CTRM engages in ocean transportation of dry bulk cargoes worldwide. It focuses on growing its fleet through acquisitions of new and modern vessels. Both companies offer seaborne transportation of major bulks, such as iron ore, coal, and grains and minor bulks, such as bauxite, fertilizers, and steel products.
The growing demand for raw materials and dry bulk goods with the resumption of industrial activities has led to an increasing need for marine shipping worldwide. Simultaneously, a labor shortage, tight container capacity, and port congestion have lately led to rising shipping rates and associated costs. But overall, the backdrop looks favorable for the marine shipping industry.
Rising investor optimism about the industry’s growth prospects is evident in the SonicShares Global Shipping ETF’s (BOAT) 15.4% gains over the past three months compared to the SPDR S&P 500 Trust ETF’s (SPY) negative returns. The global dry bulk shipping market is expected to grow at a 4% CAGR to $5.48 billion by 2030. So, both SBLK and SPOT should benefit in the coming months. But while CTRM’s stock has declined 88.4% in price over the past year, SBLK surged 86.1%. SBLK is also a clear winner with 37.1% gains versus CTRM’s negative returns over the past three months. But which of these stocks is a better pick now? Let’s find out.
Recent Financial Results
SBLK’s total revenues for its fiscal 2021 third quarter, ended Sept. 30, 2021, increased 107.6% year-over-year to $415.69 million. The company’s operating income came in at $235.38 million, up 444.3% from the year-ago period. And while its adjusted net income increased 717.5% year-over-year to $224.67 million, its adjusted EPS increased 655.2% to $2.19. As of Sept. 30, 2021, the company had $369.65 million in cash and cash equivalents and restricted cash.
For its fiscal 2021 fourth quarter ended Dec. 31, 2021, CTRM’s vessel revenues increased 1268.4% year-over-year to $60.01 million. The company’s operating income came in at $30.55 million, versus a $475,406 loss prior-year period. CTRM’s net income came in at $29.21 million, versus a $768.912 loss in the year-ago period. Its EPS was $0.18, versus a $0.06 loss per share in the prior-year period. The company had $37.17 million in cash and cash equivalents as of Dec. 31, 2021.
Past Financial Performance
SBLK’s EBITDA and net income have increased at CAGRs of 40.7% and 79.5%, respectively, over the past three years. And the company’s EPS has grown at a 59.3% CAGR over the past three years.
In comparison, CTRM’s EBITDA and net income have grown at CAGRs of 214% and 226.3%, respectively, over the past three years. The company’s EPS has declined at 57.8% CAGR over the past three years.
Valuation
In terms of trailing-12-month Price/Sales, SBLK is currently trading at 2.36x, which is 116.5% higher than CTRM’s 1.09x. And in terms of trailing-12-month Price-to-Book, CTRM’s 0.47x compares with SBLK’s 1.40x.
Profitability
SBLK’s trailing-12-month revenue is almost 8.4 times CTRM’s. SBLK is also more profitable, with a 55.3% EBITDA margin versus CTRM’s 51.5%.
Furthermore, SBLK’s 14% levered free cash flow compares favorably with CTRM’s negative value.
POWR Ratings
While SBLK has an overall B grade, which translates to Buy in our proprietary POWR Ratings system, CTRM has an overall C grade, equating to a Neutral. The POWR Ratings are calculated by considering 118 distinct factors, each weighted to an optimal degree.
Both SBLK and CTRM have B grades for Momentum, in sync with their its impressive price gains over the past year. SBLK has gained 18% over the past month, while CTRM rose 26.7%.
SBLK has a B grade for Quality, consistent with its higher-than-industry profitability ratios. SBLK’s 14% trailing-12-month levered free cash flow is 174.2% higher than the 5.1% industry average. CTRM’s C grade for Quality is in sync with its negative levered free cash flow value.
Of 46 stocks in the B-rated Shipping industry, SBLK is ranked #14, while CTRM is ranked #26.
Beyond what we have stated above, our POWR Ratings system has also rated SBLK and CTRM for Growth, Sentiment, Stability, and Value. Get all SBLK ratings here. Also, click here to see the additional POWR Ratings for CTRM.
The Winner
Despite rising shipping rates, the growing demand for shipping services to transport dry bulk commodities should benefit SBLK and CTRM. However, its higher profitability we think makes SBLK a better buy here.
Our research shows that the odds of success increase if one bets on stocks with an Overall POWR Rating of Buy or Strong Buy. Click here to access the top-rated stocks in the Shipping industry.
SBLK shares were trading at $27.31 per share on Tuesday afternoon, up $1.03 (+3.92%). Year-to-date, SBLK has gained 20.47%, versus a -6.25% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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