Castor Maritime Inc. (CTRM) and ZIM Integrated Shipping Services Ltd. (ZIM) 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. ZIM is in Israel and is part of the Deep-Sea Freight Transportation Industry. ZIM operates in specific areas where it has a competitive advantage and where it can provide a high-quality service.
Shipping companies were severely hit by the COVID-19 pandemic as international trade contracted. However, rising demand for raw materials with the global resuming manufacturing activities is expected to shape the shipping industry’s performance this year. According to Statista, roughly 80% of goods are transported by ship.
But, while ZIM has gained 106.5% over the past three months, CTRM has declined by 75.9%. Furthermore, ZIM has gained 24.3% over the past month, while CTRM lost 18%. But which of these two stocks is a better pick now? Let’s find out.
This month, CTRM entered an agreement to acquire a 2013 Japanese-built Kamsarmax dry bulk carrier through its subsidiary. The deal is expected to close in the second quarter or beginning of the third quarter this year. The company also entered agreements 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 2021. These purchases will increase CTRM’s operational capacity, which should increase its revenues and earnings potential.
On April 26, ZIM announced the establishment of ZIMARK, a technology-based company created in collaboration with Israeli startup Sodyo Ltd. to provide next generation scanning solutions for the logistics and supply chain sectors. This move is expected to diversify ZIM’s operations and expand its customer base.
And in March, ZIM and Marius Nacht invested heavily in a company called WAVE BL to ensure the shift into paperless billing in the shipping industry. This should allow ZIM to align its operations with the ongoing global digital transformation and reduce its overhead billing expenses in the future.
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 a $0.80 million net loss, which represents a 245.8% year-over-year decrease. Its EPS declined 105% from the prior-year-quarter to $0.01.
For its fiscal year 2020 fourth quarter, ended December 31, ZIM’s revenue increased 64.5% year-over-year to $1.40 billion. The company’s operating income increased 1,344.3% year-over-year to $7.90 million. Its net income increased 31,029.1% from the same period last year to $366.40 million. Also, its EPS was $3.70, indicating a substantial improvement from break-even earnings reported in the same period last year.
Past Financial Performance
CTRM’s revenues and EBITDA improved 109.3% and 11.7%, respectively, year-over-year. In comparison, ZIM’s revenues rose by 21% from the same period last year, while its EBITDA increased 433.7% year-over-year.
ZIM’s $4 billion trailing-12-month revenue is much higher than CTRM’s. Also, ZIM is more profitable, with a 13% net income margin versus CRTM’s negative value.
Also, ZIM’s ROA and EBIT margin of 18.6% and 17.7%, respectively, compare favorably with CTRM’s 0.5% and 3.6%.
In terms of trailing-12-month EV/Sales, CTRM is currently trading at 32.53x, 2128.1% higher and more expensive than ZIM, which is currently trading at 1.46x. CTRM is also more expensive in terms of trailing-12-month P/S (2.26x versus 0.97x).
In terms of trailing-12-month EV/EBITDA, CTRM’s 184.45x is 2,214.3% higher than ZIM’s 7.97x.
So, ZIM is the more affordable stock.
CTRM has an overall F rating of F which equates to a Strong Sell in our proprietary POWR Ratings system. However, ZIM has an overall B rating of B which represents a 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 because its 32.53x trailing-12-month EV/Sales is significantly higher than the 2.22x industry average. However, ZIM has a B grade for Value. This is in sync with the company’s lower-than-industry trailing-12-month EV/Sales.
CTRM also has a D grade for Quality, which is consistent with its negative trailing-12-month levered free cash flow margin. ZIM, in comparison, has an A grade for Quality. This is justified because its 12.9% trailing-12-month levered free cash flow margin is higher than 8.6% industry average. Of the 50 stocks in the Shipping industry, ZIM is ranked #4, while CTRM is ranked #49.
In addition to the POWR Ratings grades we’ve just highlighted, both CTRM and ZIM are graded for Growth, Momentum, Sentiment and Stability. Click here to see the additional ratings for ZIM. Also, get all CTRM’s ratings here.
Even though the shipping industry is expected to recover in the coming months, not all stocks are poised to benefit from the industry tailwinds. We think ZIM’s higher profitability and lower valuations make it a more attractive investment bet 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.
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ZIM shares were trading at $37.50 per share on Wednesday afternoon, up $3.08 (+8.95%). Year-to-date, ZIM has gained 226.09%, versus a 9.30% 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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