Castor Maritime Inc. (CTRM) and Navios Maritime Partners L.P. (NMM) 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. NMM, based in Monaco, owns and operates dry cargo vessels in Asia, Europe, North America, and Australia.
Most shipping companies were hit severely by the COVID-19 pandemic due to mobility restrictions and a contraction of international trade. However, as economies worldwide resume manufacturing and infrastructural activities, the demand for commodities, such as iron ore and coal, which are primarily transported by sea, is increasing, and the trend is expected to continue for the foreseeable future. In fact, according to Globe Newswire, the global dry bulk shipping market is expected to grow at a 5.10% CAGR between 2020 – 2027. Consequently, NMM and CTRM should witness increasing demand for their services.
While NMM has gained 314.4% over the past nine months, CTRM has returned 65.3%. In terms of their past six months’ performance, NMM is a clear winner with 240.9% returns versus CTRM’s 91.2%. But which of these two stocks is a better pick now? Let’s find out.
CTRM announced on May 17 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 April 1, 2021, NMM announced that it had completed the acquisition of Navios Maritime Containers L.P. The move is expected to help the company expand its operations and grow its organization.
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, NMM’s revenue came in at $65.10 million, up 40% year-over-year. The company’s adjusted EBITDA increased 76.4% from the same period last year to $33.70 million. The company’s net income increased 1,374.5% year-over-year to $136.70 million.
NMM’s $245.34 million trailing-12-month revenue is 19.64 times of CTRM’s $12.49 million. Moreover, NMM is more profitable, with a 91.29% gross profit margin versus CTRM’s 36.7%.
Also, NMM’s ROA and EBIT margin of 1.74% and 18.28%, respectively, compare favorably with CTRM’s 0.54% and 3.62%.
In terms of trailing-12-month EV/S, CTRM is currently trading at 22.71x, 76.9% higher than NMM’s 5.25x. In terms of trailing-12-month EV/EBITDA, CTRM’s 128.78x is 90% higher than NMM’s 12.84x.
So, NMM is the more affordable stock.
CTRM has an overall F rating, which equates to a Strong Sell in our proprietary POWR Ratings system. However, NMM 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 an F grade for Quality. This is justified by its negative value for its trailing-12-month net income margin compared to the 4.89% industry average. NMM, in contrast, has a B grade for Quality. This is in sync with its 32.14% trailing-12-month net income margin, which is higher than the 4.89% industry average.
CTRM has a D grade for Value. This is consistent with its 22.71x trailing-12-month EV/S, which is 937% higher than the 2.19x industry average. In comparison, NMM has a C grade for Value, in sync with its 5.25x trailing-12-month EV/S, which is slightly higher than the 2.19x industry average.
Of 50 stocks in the Shipping industry, NMM is ranked #12, while CTRM is ranked #48.
In addition to the POWR Ratings grades we’ve just highlighted, both CTRM and NMM are graded for Momentum, Growth, Sentiment and Stability. Click here to see the additional ratings for NMM. 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. Despite being one of the established players in the shipping industry, CTRM does not seem to be a good bet now owing to its sky-high valuation, which is not in sync with its weak financials. In comparison, we think it is better to bet on NMM based on its reasonable valuation and higher profitability.
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.
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NMM shares were trading at $27.25 per share on Tuesday afternoon, up $0.73 (+2.75%). Year-to-date, NMM has gained 144.41%, versus a 12.74% 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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