Like most shipping companies, Athens, Greece-based international shipper Seanergy Maritime Holdings Corp. (SHIP) suffered a major setback from COVID-19 related travel and other restrictions. Consequently, the stock lost more than 56% over the past year to close yesterday’s trading session at $1.09. It is currently trading 81.6% below its $5.92 52-week high.

As the global economy gradually reopens, the demand for several commodities, including coal, iron ore and steel, is expected to grow in the coming months, which will increase the demand for shipping.

But even though SHIP transports primarily iron ore through its dry bulk transportation services, it is not well-positioned to capitalize on the shipping industry’s recovery in the near term, and so a question hangs as to the degree the company’s operations and its stock price can recover lost ground?

Here’s what we think could shape SHIP’s performance in the near term:

Weak Financials

SHIP’s net revenue decreased 23.2% year-over-year to $21.31 million for its fiscal fourth quarter ended December 31. Its time charter equivalent rate (TCE) earned during the fourth quarter was $16,511, representing a 28% year-over-year decline. The company’s operating income decreased 50.2% year-over-year to $4.37 million. Its net loss for the quarter was  $2.32 million compared to $310 million in net income in the prior-year period. Also, its loss per share was  $0.03 compared to $1.85 in EPS in the year-ago period.

Financial Restructuring

On April 14, SHIP announced that it  had received a commitment letter from one of its existing lenders for a $37.45 million facility. The proceeds are expected to be used to  refinance a  $24.45 million existing facility secured by the M/V Squireship, the M/V Leadership and the M/V Lordship. SHIP also announced the completion of a registered direct offering priced at-the-market on February 16, and the closing of the documentation for the $179 million financial restructuring announced on January 12.The proceeds from these offerings are expected to be used for general corporate purposes.

Poor Profitability

Regarding its trailing-12-month net income margin, SHIP’s negative 29% compares poorly to  the 4.8% industry average. Its trailing-12-month levered free cash flow margin is also negative versus the 8.6% industry average. Furthermore,  its trailing-12-month return on common equity and trailing-12-month return on total assets are negative compared to the 9.5% and 3.9% respective industry averages of.

POWR Ratings Reflect Bleak Prospects

SHIP has an overall D rating, which equates to Sell in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree. 

Our proprietary rating system also evaluates each stock based on eight different categories. SHIP has a D grade for Quality also, which is in sync with its lower-than-industry average profitability ratios. It has an F grade for Stability.

The stock also has an F grade for Sentiment, consistent with unfavorable analyst sentiment.

In addition to the POWR Ratings grades we’ve just highlighted, we’ve also graded SHIP for Growth, Value and Momentum. Get all the SHIP ratings here.

SHIP is ranked #42 of 49 stocks in the D-rated Shipping industry.

Better than SHIP: Click here to access 15 top-rated stocks in the same industry.

Bottom Line

Even though the shipping industry is expected to recover in the near to midterm, SHIP is in an unfavorable position to recover. This can be attributed primarily  to its weak financials and poor profitability. Furthermore, its EPS is expected to decline 57.1% in fiscal 2022. So, we think  it is wise to avoid the stock now.

SHIP shares were trading at $1.09 per share on Wednesday morning, down $0.00 (0.00%). Year-to-date, SHIP has gained 102.75%, versus a 10.65% rise in the benchmark S&P 500 index during the same period.

About the Author: Manisha Chatterjee

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...

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