Headquartered in Monaco, Safe Bulkers, Inc. (SB) provides marine dry-bulk transportation services. The company owns and operates dry-bulk vessels for transporting bulk cargoes, primarily coal, grain, and iron ore. It has a fleet of more than 40 dry-bulk vessels.
Last month, SB entered into an agreement to acquire the Chinese, dry-bulk, Capesize class vessel by August this year. Also, the company is set to acquire 82,500 dwt, Kamsarmax class vessels with delivery dates by August 2024 and January 2025. Such acquisitions are expected to expand the company’s fleet with energy-efficient ships and boost its revenue streams and profitability.
Shares of SB have gained 24.2% over the past six months and 13.9% over the past year to close Friday’s trading session at $4.42. The strong shipping demand and rising freight prices have contributed to the stock’s rally. SB is currently trading near its 52-week high of $5.44, which it hit on October 1, 2021.
Here is what could influence the performance of SB in the upcoming months:
Robust Financials
SB's net revenues increased 24.4% year-over-year to $77.75 million in the fiscal 2022 first quarter, ended March 31, 2022. Its operating income rose 31.7% year-over-year to $36.33 million. Its adjusted EBITDA grew 35.6% from the year-ago value to $46.94 million. In addition, the company’s adjusted net income and adjusted earnings per share came in at 32.33 million and $0.24, registering an increase of 94.1% and 71.4% year-over-year, respectively.
Favorable Analyst Estimates
For the fiscal year 2022, ending December 2022, the $342.44 million consensus revenue estimate represents a 4.1% improvement from the previous year. The company has surpassed the consensus revenue estimates in each of the trailing four quarters. Analysts expect SB’s EPS for the current year to increase 3.2% year-over-year to $1.30. In addition, its EPS is expected to grow at 14% per annum over the next five years.
High Profitability
In terms of trailing-12-month gross profit margin, SB’s 75.73% is 158.5% higher than the industry average of 29.30%. Likewise, its trailing-12-month net income margin of 55.02% is 722.6% higher than the industry average of 6.69%. Moreover, the stock’s trailing-12-month ROCE and ROTA of 30.17% and 16.14% are higher than the industry averages of 14.31% and 5.29%, respectively.
Discounted Valuation
In terms of forward non-GAAP P/E, SB’s 3.39x is 78.9% lower than the 16.02x industry average. Its 3.46x forward EV/EBITDA is 65.6% lower than the 10.06x industry average. Also, the stock’s 2.37x forward Price/ Cash Flow is 82% lower than the 13.19x industry average.
POWR Ratings Show Promise
SB has an overall B rating, equating to a Buy in our POWR Ratings system. The POWR Ratings are calculated by accounting for 118 distinct factors, with each factor weighted to an optimal degree.
SB has a B grade for Momentum. This is justified, as the stock is currently trading above its 50-day and 200-day moving averages of $4.36 and $4.20, respectively, indicating an uptrend, matching the Momentum grade. In addition, SB has a B grade for Value, in sync with its lower-than-industry valuation ratios.
SB is ranked #10 out of 46 stocks in the A-rated Shipping industry.
Beyond what I have stated above, we have also given SB grades for Quality, Growth, Sentiment, and Stability. Get all the SB ratings here.
Bottom Line
Despite the lingering supply chain constraints, SB is well-positioned to benefit from the strong demand amid a surge in worldwide trade and rising freight prices. Thus, SB could be a valuable addition to one’s portfolio.
How Does Safe Bulkers (SB) Stack Up Against its Peers?
SB has an overall POWR Rating of B, equating to a Buy rating. Check out these other stocks within the Shipping industry with an A (Strong Buy) rating: A.P. Møller - Mærsk A/S (AMKBY), Overseas Shipholding Group, Inc. (OSG), and Matson, Inc. (MATX).
SB shares were unchanged in after-hours trading Monday. Year-to-date, SB has gained 9.45%, versus a -20.80% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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