A Quick Look at 5 Dry Bulk Shippers

As a yacht captain, the onset of hurricane season means I have to be extra-diligent in watching the weather. It’s important to stay a step ahead of developing systems and prepare accordingly. Shipping stocks can behave almost as unpredictably as the weather, and by running a thorough vessel inspection from time to time, investors can feel better about the safety of their ships.

Shares of dry bulk shippers have traveled more miles of range-bound trading lately than many of the megacarriers in their fleets. For all the attention they have garnered as investors seek out additional plays on the commodities boom, the group listed below is still trading below highs reached back in November 2007. Let’s start our vessel inspection with an examination of some key metrics for valuation, performance, and fiscal health.

Company

Forward P/E ('09)

Price / Book Value

Return on Equity

Debt / Equity Ratio

Diana Shipping (NYSE: DSX  )

13.1

3.2

28.4%

0.2

Navios Maritime (NYSE: NM  )

6.1

1.7

52%

0.8

Excel Maritime (NYSE: EXM  )

7.6

2.5

23.6%

1.0

DryShips (Nasdaq: DRYS  )

6.7

3.1

64.4%

1.2

Eagle Bulk (Nasdaq: EGLE  )

10.7

3.1

12.6%

1.2

Data from Yahoo! Finance.

Judging by the above list, Navios Maritime appears to have relative bargain potential, though that may have something to do with the 10% pounding the shares received on Thursday after the company reported poor first-quarter earnings. Navios reported that while revenue more than tripled, net earnings dropped 4%, as surging costs cut hard into their bottom line. Investors in the sector should keep a watchful eye on cost increases, which will be inevitable in this environment, and gauge whether their picks are raising rates fast enough to absorb the hit.

Diana Shipping saw its charter rates rise 66% last quarter and enjoyed a 149% increase in net profits as a result. With its reasonable debt levels and charters booked on carriers still under construction, Diana looks relatively well-positioned to ride out the credit storm that is making it hard for some companies to expand their fleets. Insiders like her chances too, holding roughly a quarter of her shares. With a relatively rich valuation compared to her peers, though, I would caution Fools to enter the water one toe at a time.

Further Foolishness:

Fool contributor Christopher Barker captains yachts and writes about stocks. He can also be found acting Foolishly within the CAPS community under the username TMFSinchiruna. He owns shares of Diana Shipping. The Motley Fool has a disclosure policy.


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  • Report this Comment On May 31, 2008, at 6:19 PM, tonyinbrazil wrote:

    Navios seems like a fine company and all, but they've missed earnings twice in a row now.

    As well, their rates are not linked with the BDI - which has been reaching new YTD highs.

    Finally, the love (i.e. buying momentum) seems to have waned since the recent YTD high was hit a few weeks ago.

    All that being so - despite the attractive multiples - it's probably just a matter of time before NM starts to move towards retesting its recent lows.

  • Report this Comment On November 19, 2008, at 12:23 AM, irjsi wrote:

    Navios Maritime!

    1. if her price sinks, I'll don scuba gear and chase her to the bottom!

    2. If 'Charterers' are forced to 'abandon NM's vessels' due to 'The Derivatives Tsunami' created via the Global financial wizards and their $US 2-3 Hundred Trillion 'Derivatives Binging', even the best efforts of the most stalwart of 'NM's and/or the Sailors of any other carrier, will be unable to thwart the logistics/commodities collapse!

    3. Millions of Souls will perish due to either starvation or civil strife.

    4. YOU 'money gurus' created 'Derivatives'!

    Can you survive on the meager calorie content of your 'derivatives'?

    Roy Stewart,

    Phoenix AZ, USA

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