Castor Maritime Inc. (CTRM - Get Rating) and Matson, Inc. (MATX - Get Rating) are two established players in the shipping industry. They provide ocean transportation services. Based in Cyprus, CTRM provides seaborne transportation services for dry bulk cargo, including iron ore, coal, grains, steel products, fertilizers, cement, bauxite, sugar, and scrap metals. MATX, headquartered in Hawaii, operates through two segments: Ocean Transportation and Logistics.

Shipping companies were hit severely by the COVID-19 pandemic owing to global travel restrictions and and industrial production slowdown. But many of them appear to now be on a path of recovery this year. According to Statista, roughly 80% of the goods are transported by ships. Because the industry is expected to benefit from the recovery of international trade this year, we think it could be wise for investors to investigate the prospects of CTRM and MATX.

While MATX has returned 76.8% over the past nine months, CTRM has gained 127.5%. In terms of past six-month performance, CTRM is a clear winner with 274.5% returns versus MATX’s 18.4%. But which of these two stocks is a better pick now? Let’s find out.

Latest Movement

In May, through a separate wholly owned subsidiary, CTRM entered  an agreement to acquire a 2013 Japanese-built Kamsarmax dry bulk carrier. The deal is expected to close in  the second quarter or beginning of the third quarter this year, subject to  certain  closing conditions.

The company also made  in  April to acquire two 2006 Korean-built MR1 tankers, two 2004 Korean-built Aframax/LR2 tankers and one 2002 Korean-built Aframax/LR2 tanker. It took delivery of M/V Magic Twilight and M/V Magic Thunder in April.

Also, MATX’s board of directors declared $0.23 per share  second quarter dividend, payable on June 3. The company took delivery of Matsonia in December 2020, the second of two new Kanaloa Class combination container/roll-on, roll-off ships built for it by General Dynamics NASSCO. They join two new containerships, the Daniel K Inouye and the Kaimana Hila.

Recent Financial Results

CTRM’s revenue increased 54.3% year-over-year to $4.40 million for the fourth quarter ended, December 31. The company suffered an $0.80 million net loss, which represents a 245.8% year-over-year decrease. Its EPS also declined 105% year-over-year to $0.01.

For its fiscal year 2021 first quarter, ended March 31, 2021, MATX’s revenue increased 39.8% year-over-year to $560.50 million. The company’s operating income increased 1344.3% year-over-year to $7.90 million. Its net income increased 2194.7% year-over-year to $87.2 million. Also, its EPS came in at $2.01, up 2133.3% year-over-year.

Profitability

MATX’s $2.58 billion in trailing-12-month revenue  is much higher than CTRM’s $12.49 million. Also,  MATX is more profitable, with a 10.7% net income margin versus CTRM’s negative value.

Also, MATX’s 7.9% and 14.1% respective ROA and EBIT margins compare favorably with CTRM’s 0.5% and 3.6%.

Valuation

In terms of trailing-12-month EV/Sales, CRMT is currently trading at 34.63x, which is significantly more expensive than MATX, which is currently trading at 1.47x. CRMT is also more expensive in terms of trailing-12-month P/S (2.44x versus 1.11x).

In terms of trailing-12-month EV/EBITDA, CTRM’s 196.37x is 2,407.9% higher than MATX’s 7.83x.

So, MATX is the more affordable stock.

POWR Ratings

CTRM has an overall F rating, which equates to a Strong Sell in our proprietary POWR Ratings system. However, MATX has an overall A rating, which represents a Strong Buy. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

CTRM has a D grade for Value. This is justified given that its 34.63x trailing-12-month EV/Sales is much higher than the 2.19x industry average. Its 2.44x trailing-12-month P/S is also higher than the 1.78x industry average. MATX has a B grade for Value. This is in sync with its 1.47x trailing-12-month EV/S, which is  32.6% lower than the 2.19x industry average and 1.11x trailing-12-month P/S, which is 37.5% lower than the 1.78x industry average. 

CTRM also has a D grade for Quality, which is consistent with its negative trailing-12-month levered free cash flow margin compared to the 8.2% industry average.  MATX’s 9.4% trailing-12-month levered free cash flow margin, which is higher than the 8.2% industry average, helped it earn a B grade for Quality.

Moreover, of 50 stocks in the Shipping industry, MATX is ranked #1 and CTRM is ranked #49.

In addition to the POWR Ratings grades we’ve just highlighted,  CTRM and MATX are rated for Growth, Momentum, Sentiment and Stability. Click here to see the additional ratings for MATX. Also, get all CTRM’s ratings here.

The Winner

Even though the shipping industry is expected to recover in the coming months, not all stocks are poised to benefit from the industry tailwinds. While MATX reported impressive earnings results for its last-reported quarter, CTRM’s results were disappointing. Also,  MATX is much cheaper than  CTRM. So, MATX is the 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 learn about other top-rated stocks in the Shipping industry.

MATX shares were trading at $66.26 per share on Thursday afternoon, down $0.18 (-0.27%). Year-to-date, MATX has gained 17.12%, versus a 11.81% 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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