Castor Maritime Inc. (CTRM) and Costamare Inc. (CMRE) 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. CMRE is an international owner of containerships. The Monaco-based company provides marine transportation services worldwide by chartering its container vessels to liner operators under long-, medium-, and short-term time charters.
Most shipping companies were hit severely by the COVID-19 pandemic as travel-related restrictions and a decline in international trade brought the industry to a near halt. However, as major economies across the globe resume manufacturing and infrastructure activities, the demand for commodities such as iron ore and coal—which are transported primarily by sea—is increasing. With continued progress on the coronavirus vaccination front worldwide and reduced COVID-19 cases, this trend is expected to continue. According to Globe Newswire, the global dry bulk shipping market is expected to grow at a 5.10% CAGR between 2020 - 2027.Both CMRE and CTRM should witness increasing demand for their services as a result.
While CMRE has gained 123.2% over the past nine months, CTRM has returned 122.2%. However, in terms of their past six months’ performance, CTRM is a clear winner with 97.1% returns versus CMRE’s 49.9%. But which of these two stocks is a better pick now? Let's find out.
Latest Movements
On June 9, CTRM announced that it took delivery of the M/V Magic Eclipse, a 2011 Japanese-built Panamax dry bulk vessel. In May, it took delivery of the M/V Magic Nebula, the M/T Wonder Vega and the M/V Magic Starlight.
In April, CMRE acquired York Capital’s 60% equity interest, on average, in five 11,000 TEU containerships. The acquisition brings the company’s ownership interest in these five vessels to 100%.
Recent Financial Results
CTRM’s revenue increased 155.9% year-over-year to $6.97 million for the first quarter ended, March 31, 2021. The company’s net income came in at $1.13 million, compared to a $0.26 million loss in the prior-year quarter. Its EPS was $0.02 versus a $0.68 loss per share in the year-ago period.
For the first quarter, ended March 31, 2021, CMRE’s revenue was $126.73 million, up 4.4% year-over-year. The company’s adjusted net income increased 16.6% from the same period last year to $37.98 million. Its adjusted EPS increased 14.8% year-over-year to $0.31 million.
Profitability
CMRE’s $465.64 million trailing-12-month revenue is 27.81 times CTRM’s $16.74 million. Furthermore, CMRE is more profitable, with a 69.32% gross profit margin versus CTRM’s 44.82%.
Also, CMRE’s ROA and EBIT of 3.45% and 38.87%, respectively, compare favorably with CTRM’s 0.67% and 8.13%.
Valuation
In terms of trailing-12-month EV/S, CTRM is currently trading at 16.23x, 136.2% higher than CMRE’s 6.87x. And in terms of trailing-12-month EV/EBITDA, CTRM’s 79.65x is 618.9% higher than CMRE’s 11.08x.
So, CMRE is the more affordable stock.
POWR Ratings
CTRM has an overall D rating, which equates to Sell in our proprietary POWR Ratings system. However, CMRE has an overall B rating, which represents a Buy. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
CMRE has a C grade for Quality, consistent with its 9.50% trailing-12-month net income margin, which is slightly higher than the 5.05% industry average. However, CTRM has a D grade for Quality, which is consistent with its negative value for its trailing-12-month net income margin versus the 5.05% industry average.
Also, while CMRE has a C grade for Stability, CTRM has an F grade on this front. CMRE has an A grade for Sentiment, which is in sync with favorable analyst sentiment, while CTRM has a D grade for Sentiment.
Of the 49 stocks in the Shipping industry, CMRE is ranked #7, while CTRM is ranked #43.
In addition to the POWR Ratings grades we’ve just highlighted, CTRM and CMRE are graded for Momentum, Growth, and Value. Click here to see the additional ratings for CMRE. 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 from industries worldwide. But despite being one of the shipping industry’s established players, CTRM does not appear to be a good bet now owing to its high valuation and weak financials. So, we think it is better to bet on CMRE 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.
CMRE shares were trading at $12.02 per share on Friday afternoon, up $0.51 (+4.43%). Year-to-date, CMRE has gained 48.28%, versus a 13.56% 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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