Castor Maritime Inc. (CTRM) and Danaos Corporation (DAC) are two established players in the shipping industry. Based in Limassol, Cyprus, CTRM provides seaborne transportation services for dry bulk cargo, including iron ore, coal, grains, and steel products. Based in Piraeus, Greece, DAC owns and operates containerships across Australia, Asia, Europe, and the United States. Its principal business is the acquisition and operation of vessels.
Most shipping companies were hit severely by the COVID-19 pandemic due to social distancing restrictions and a contraction of international trade. However, because economies worldwide are resuming manufacturing and infrastructure activities, the demand for commodities, which are transported primarily by sea, is increasing. This is generating increased demand for shipping services. According to Globe Newswire, the global dry bulk shipping market is expected to grow at a 5.10% CAGR between 2020 – 2027. As a result, both DAC and CTRM should witness increasing demand for their services.
While DAC has gained 1,106.4% over the past nine months, CTRM has returned nearly 176%. In terms of past six months’ performance, DAC is again a clear winner with 344.5% returns versus CTRM’s 145.4%. But which of these two stocks is a better pick now? Let’s find out.
On May 17, CTRM announced that it had entered agreements through two separate wholly owned subsidiaries to acquire a 2013 Japanese-built and a 2014 Korean-built Panamax dry bulk carrier from unaffiliated third parties for $19.06 million and $21 million, respectively. This expenditure could take a toll on the company’s already weak financials.
On May 11, 2021, DAC announced that its board of directors had approved a dividend reinvestment plan that offers its shareholders the opportunity to purchase additional shares by having their cash dividends automatically reinvested in its common stock. For those who choose not to participate in the program will receive cash dividends, as declared and paid. The program shows the company’s interest in growing its organization aggressively by reinvesting its earnings.
Recent Financial Results
CTRM’s revenue increased 54.3% year-over-year to $4.40 million for the fourth quarter, ended December 31, 2020. The company’s net loss came in at $0.80 million, which represents a 245.8% year-over-year decrease. Its EPS declined 105% from the prior-year quarter to $0.01.
For the first quarter, ended March 31, 2021, DAC’s operating income came in at $132.12 million, up 24.4% year-over-year. The company’s net income increased 920.3% from the same period last year to $296.80 million. Its EPS came in at $14.50, which represents a 1,136.8% year-over-year rise.
DAC’s $487.52 million trailing-12-month revenue is much higher than of CTRM’s $12.49 million. Furthermore, DAC is more profitable, with a 70.9% gross profit margin versus CTRM’s 36.7%.
Also, DAC’s ROA and EBIT margins of 4.51% and 43.83%, respectively, compare favorably with CTRM’s 0.54% and 3.62%.
In terms of trailing-12-month EV/S, CTRM is currently trading at 31.34x, 81% higher than DAC’s 5.96x. In terms of trailing-12-month EV/EBITDA, CTRM’s 177.67x is 94.83% higher than DAC’s 9.18x.
So, DAC is the more affordable stock.
CTRM has an overall F rating, which equates to a Strong Sell in our proprietary POWR Ratings system. However, DAC has an overall B rating, which represents a Buy. The POWR Ratings are calculated by considering 118 different factors with the weighting of each optimized to improve overall performance.
CTRM has a D grade for Quality. This is justified by its negative value for trailing-12-month return on total assets. DAC, in contrast, has a B grade for Quality. Its 12.94% trailing-12-month return on total assets is 227.3% higher than the 3.95% industry average.
CTRM has a C grade for Momentum, which is consistent with its 64.9% loss over the past three months and 11.1% decline over the past month. DAC has a B grade for Momentum, in sync with the company’s 59.8% returns over the past three months and 22.1% gains over the past month.
Of the 56 stocks in the Shipping industry, DAC is ranked #13, while CTRM is ranked #53.
In addition to the POWR Ratings grades I’ve just highlighted, both CTRM and DAC are graded for Value, Growth, Sentiment and Stability. Click here to see the additional ratings for DAC. Also, get all CTRM’s ratings here.
The shipping industry has been making a robust recovery driven by rising demand for raw materials from industries worldwide. However, DAC seems to be the better buy here based on its reasonable valuation and higher profitability versus CTRM.
Our research shows that the odds of success increase if you bet on stocks with an Overall POWR Rating of Buy or Strong Buy. Click here to learn about other top-rated stocks in the Shipping industry.
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DAC shares fell $0.26 (-0.40%) in after-hours trading Monday. Year-to-date, DAC has gained 204.53%, versus a 12.48% rise in the benchmark S&P 500 index during the same period.
About the Author: Ananyo Guha Niyogi
Ananyo’s ardent interest in capital markets, wealth management, and financial regulatory issues, led him to a career as an investment analyst. His goal is to educate individual investors by making complex financial issues easy to understand. More...
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