Despite the rising energy prices, the continued global supply chain disruption exacerbated by the Russia-Ukraine war and China’s COVID lockdowns has been beneficial for most shipping operators because of high demand. In addition, high freight rates and international demand for manufactured goods are helping shipping companies expand their profit margins. Moreover, rapid digitization, automation in logistics, and growing cargo shipping services across sectors 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 CAGR of 5.2% from 2022 to 2030. Therefore, both Matson, Inc. (MATX) and Golden Ocean Group Limited (GOGL) should benefit.
MATX provides ocean transportation and logistics services. The company's Ocean Transportation segment offers ocean freight transportation services, and its Logistics segment provides multimodal transportation brokerage services. GOGL is a shipping company that owns and operates a fleet of dry bulk vessels comprising Newcastlemax, Capesize, Panamax, and Ultramax vessels worldwide.
Year-to-date, MATX is down about 4% and GOGL has surged 46%. Which of these two stocks is a better buy now? Let’s find out.
Latest Developments
On April 28, 2022, The Board of Directors of MATX declared a second-quarter dividend of $0.30 per common share. The dividend will be paid on June 2, 2022, to all shareholders of record as of the close of business on May 12, 2022.
On March 8, 2022, GOGL announced the sale of three of its oldest Panamax vessels, Golden Empress, Golden Enterprise, and Golden Endeavour, delivered in 2010 and 2011, as part of the company’s ongoing strategy to ensure that it operates a modern, fuel-efficient fleet with a reduced emissions profile.
Recent Financial Results
MATX’s operating revenues increased 63.7% year-over-year to $1.17 billion for the fiscal first quarter ended March 31, 2022. The company’s operating income grew 259.9% year-over-year to $432.60 million, while its net income came in at $339.20 million representing a 289% year-over-year increase. Also, its EPS came in at $8.23, up 313.6% year-over-year.
GOGL’s revenues increased 126.3% year-over-year to $381.81 million for the fiscal fourth quarter ended December 31, 2021. The company’s adjusted EBITDA grew 310.5% year-over-year to $243.54 million, while its net income came in at $203.82 million representing a 703.4% year-over-year increase. Also, its EPS came in at $1.01, up 461.1% year-over-year.
Past and Expected Financial Performance
Over the past three years, MATX’s revenue and EPS grew at CAGRs of 25% and 123.3%. Analysts expect MATX’s revenue to increase 37.3% for the quarter ending June 30, 2022, and 13.8% in fiscal 2022. The company’s EPS is expected to grow 122.8% for the quarter ending June 30, 2022, and 34.4% in fiscal 2022.
On the other hand, GOGL’s revenue and EPS grew at CAGRs of 22.2% and 67%, respectively, over the past three years. The company’s revenue is expected to decrease 4.7% for the quarter ending June 30, 2022, and 14.3% in fiscal 2022. Its EPS is expected to decline 11.5% for the quarter ending June 30, 2022, and 22.4% in fiscal 2022.
Profitability
MATX’s trailing-12-month revenue is 3.65 times what GOGL generates. MATX is also more profitable, with a levered FCF margin of 14.96% compared to GOGL’s negative returns.
Furthermore, MATX’s ROE, ROA, and ROTC of 80.24%, 25.82%, and 35.45% are higher than GOGL’s 31.98%, 10.28%, and 10.60%, respectively.
Valuation
In terms of forward non-GAAP P/E, GOGL is currently trading at 6.65x, 114.5% higher than MATX’s 3.10x. Moreover, GOGL’s forward EV/EBITDA ratio of 6.34x is 144.8% higher than MATX’s 2.59x.
So, MATX is relatively affordable here.
POWR Ratings
MATX has an overall rating of A, which equates to a Strong Buy in our proprietary POWR Ratings system. On the other hand, GOGL has an overall rating of C, which translates to Neutral. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
MATX has a B grade for Value, consistent with its forward EV/S of 0.96x, 38.8% lower than the industry average of 1.57x. However, GOGL has a C grade for Value, in sync with its forward EV/S of 4.60x, 193.5% higher than the industry average of 1.57x.
Moreover, MATX has a grade of B for Quality. This is justified given MATX's 1.27% trailing-12-month asset turnover ratio, 58.7% higher than the industry average of 0.80%. On the other hand, GOGL has a Quality grade of C, in sync with its 0.39% trailing-12-month asset turnover ratio, 51.3% lower than the industry average of 0.80%.
Of the 45 stocks in the A-rated Shipping industry, MATX is ranked #2. In comparison, GOGL is ranked #25.
Beyond what I’ve stated above, we have also rated the stocks for Growth, Sentiment, Momentum, and Stability. Click here to view all the MATX ratings. Also, get all the GOGL ratings here.
The Winner
The shipping industry is expected to grow exponentially with increasing demand this year and beyond. While both MATX and GOGL are expected to gain, it is better to bet on MATX now because of its better growth prospects, lower valuation, and high 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.
MATX shares were trading at $87.27 per share on Thursday afternoon, up $1.17 (+1.36%). Year-to-date, MATX has declined -2.42%, versus a -17.14% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
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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