Castor Maritime Inc. (CTRM) and Nippon Yusen (NPNYY) are two established players in the shipping industry. Based in Cyprus, CTRM provides seaborne transportation services for dry bulk cargo. NPNYY is a shipping, transportation and logistics company domiciled in Japan. The company divides itself into three divisions: global logistics, bulk shipping, and others.
Shipping companies were hit severely by the COVID-19 pandemic as international trade seized up. However, the rising demand for raw materials as economies worldwide resume manufacturing activities is expected to speed the industry’s recovery this year.
While NPNYY has gained 209.6% over the past year, CTRM declined 39% over this period. Furthermore, NPNYY has gained 159.5% over the past nine months whereas CTRM has gained 128.9%. But which of these two stocks is a better pick now? Let's find out.
Latest Movements
CTRM entered an agreement on May 4, 2021 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, subject to the satisfaction of certain customary closing conditions. The company also entered agreements on April 30, 2021 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. These purchases will increase CTRM’s operational capacity, thereby increasing its revenues and earnings potential.
On April 26, NPNYY participated in the world’s first barge-to-ship bunkering of methanol fuel. The bunkering of methanol fuel was conducted in Rotterdam’s port under the leadership of the charterer Waterfront Shipping Company Limited, together with the cooperation of the Port of Rotterdam, Royal Vopak N.V., and TankMatch B.V. This will allow NPNYY to actively cooperate with the introduction of next-generation fuels that have a low environmental impact, and to pursue environment-friendly transportation modes and expand its operations in the clean energy space.
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 reported 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 the fourth quarter ended March 31, 2021, NPNYY’s operating income came in at ¥71,537 million ($654.10 million), up 84.9% year-over-year. The company’s net income increased 309.8% from the same period last quarter to ¥14,6315 million ($1.34 billion).
Past Financial Performance
CTRM’s revenues and EBITDA improved 109.3% and 11.7%, respectively, year-over-year. In comparison, NPNYY’s revenues declined 3.6% over this period. NPNYY’s EBITDA increased 19.3% year-over-year.
Profitability
NPNYY’s $14.53 billion trailing-12-month revenue is 1163.33 times that of CTRM’s. Also, NPNYY is more profitable, with an 8.67% net income margin versus CRTM’s negative value.
Also, NPNYY’s ROA and EBIT margin of 2.20% and 4.45%, respectively, compare favorably with CTRM’s 0.54% and 3.62%.
Valuation
In terms of trailing-12-month EV/Sales, CTRM is currently trading at 29.17x, 2,759.8% higher than NPNYY, which is currently trading at 1.02x. In terms of trailing-12-month EV/EBITDA , CTRM’s 165.40x is 1,622.9% higher than NPNYY’s 9.60x.
So, NPNYY 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, NPNYY has an overall B rating, which represents a Buy. The POWR Ratings assesses stocks by 118 different factors, each with its own weighting.
CTRM has a D grade for Value. This is justified because its 29.17x trailing-12-month EV/Sales is 1214% higher than the 2.22x industry average. However, NPNYY has a B grade for Value. This is in sync with the company’s lower-than-industry trailing-12-month EV/Sales.
CTRM has a C grade for Momentum. This is justified because the stock declined 39% over the past year. However, NPNYY has a B grade for Momentum. This is in sync with the company’s 209.6% gains over this period.
Of the 50 stocks in the Shipping industry, NPNYY is ranked #4, while CTRM is ranked #49.
In addition to the POWR Ratings grades we’ve just highlighted, both CTRM and NPNYY are graded for Quality, Momentum, Sentiment and Stability. Click here to see the additional ratings for NPNYY. Also, get all CTRM’s ratings here.
The Winner
The shipping industry has been making a robust recovery, driven by rising demand for raw materials by industries worldwide. However, NPNYY’s relatively higher profitability, impressive growth history and undervaluation makes it a better investment option here.
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.
NPNYY shares were trading at $7.97 per share on Monday afternoon, up $0.11 (+1.35%). Year-to-date, NPNYY has gained 70.48%, versus a 11.15% 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.
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