Is Navios Maritime Partners the Perfect Stock?

Every investor would love to stumble upon the perfect stock. But will you ever really find a stock that provides everything you could possibly want?

One thing's for sure: You'll never discover truly great investments unless you actively look for them. Let's discuss the ideal qualities of a perfect stock, then decide if Navios Maritime Partners (NYSE: NMM  ) fits the bill.

The quest for perfection
Stocks that look great based on one factor may prove horrible elsewhere, making due diligence a crucial part of your investing research. The best stocks excel in many different areas, including these important factors:

  • Growth. Expanding businesses show healthy revenue growth. While past growth is no guarantee that revenue will keep rising, it's certainly a better sign than a stagnant top line.
  • Margins. Higher sales mean nothing if a company can't produce profits from them. Strong margins ensure that company can turn revenue into profit.
  • Balance sheet. At debt-laden companies, banks and bondholders compete with shareholders for management's attention. Companies with strong balance sheets don't have to worry about the distraction of debt.
  • Money-making opportunities. Return on equity helps measure how well a company is finding opportunities to turn its resources into profitable business endeavors.
  • Valuation. You can't afford to pay too much for even the best companies. By using normalized figures, you can see how a stock's simple earnings multiple fits into a longer-term context.
  • Dividends. For tangible proof of profits, a check to shareholders every three months can't be beat. Companies with solid dividends and strong commitments to increasing payouts treat shareholders well.

With those factors in mind, let's take a closer look at Navios Maritime Partners.

Factor

What We Want to See

Actual

Pass or Fail?

Growth

5-Year Annual Revenue Growth > 15%

34.1%

Pass

 

1-Year Revenue Growth > 12%

13.5%

Pass

Margins

Gross Margin > 35%

93.2%

Pass

 

Net Margin > 15%

36.6%

Pass

Balance Sheet

Debt to Equity < 50%

53.8%

Fail

 

Current Ratio > 1.3

1.01

Fail

Opportunities

Return on Equity > 15%

12.7%

Fail

Valuation

Normalized P/E < 20

16.61

Pass

Dividends

Current Yield > 2%

13.5%

Pass

 

5-Year Dividend Growth > 10%

6.1%*

Fail

       
 

Total Score

 

6 out of 10

Source: S&P Capital IQ. Total score = number of passes. *4-year growth rate.

With six points, Navios Maritime Partners appears to put in a relatively attractive financial performance. But the stock's price has fallen by nearly 10% over the past year, forcing investors to rely on its lucrative dividend to achieve returns.

Navios Maritime Partners is a master limited partnership that is controlled by Navios Maritime Holdings (NYSE: NM  ) . It current operates a fleet of 21 vessels, 19 of which it owns and two of which it holds under long-term charters.

The shipping industry hasn't been kind to companies in the space lately. In the dry-bulk space, low shipping rates have challenged industry giants DryShips (Nasdaq: DRYS  ) and Diana Shipping, as a glut of capacity has forced dayrates downward for a long time. Tankers haven't done much better, with Frontline (NYSE: FRO  ) and Nordic American Tankers (NYSE: NAT  ) seeing declines as increased oil production in the U.S. has reduced the need for worldwide transportation of energy products.

Yet Navios Maritime Holdings has held up reasonably well during the crisis, thanks to contracts with Asian counterparties that are still seeing fairly strong growth. Moreover, Navios Maritime Partners has been insulated even further from the turbulence in the industry, with its massive dividends acting as ballast against the storms other industry players have seen.

For Navios Maritime Partners to improve, the key is to make sure its dividend yield is sustainable. If a long-awaited rebound in shipping does happen, it would just be icing on the cake for the MLP in its quest for perfection.

Keep searching
No stock is a sure thing, but some stocks are a lot closer to perfect than others. By looking for the perfect stock, you'll go a long way toward improving your investing prowess and learning how to separate out the best investments from the rest.

No matter what industry you follow, the best investing approach is to choose great companies and stick with them for the long term. In our free report "3 Stocks That Will Help You Retire Rich," we name stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.

Click here to add Navios Maritime Partners to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.


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