KNOT Offshore Partners’ Income Stock And EuroDry’s Growth Stock

Stock: EDRY

Rating: Buy

Author: Waleed M. Tariq

Summary

  • KNOT Offshore Partners’ shuttle tankers lessen market volatility.
  • KNOP is a strong income-focused investment.
  • EuroDry’s low P/E and high financial metrics are related to operational efficiency.
  • Both stocks are useful in a portfolio.

Bullish

  • Future financial performance should improve EuroDry’s stock.
  • KNOP, unlike EDRY, focuses on consistent dividends.
  • Long-term contracts protect the corporation from pricing fluctuation.

Bearish

  • Since the company exclusively owns dry bulk carriers, its income and growth are tied to volatile iron ore, coal trade, grains, and minor bulks markets.

KNOT Offshore Partners (KNOP)

  • KNOP uses ‘shuttle tankers’ as ‘mobile pipelines’ 16 shuttle tankers transport oil from offshore fields to onshore terminals and refineries.

2022 shuttle tanker market

  • According to Rystad Energy, shuttle tanker demand will rise as oil transit volumes rise 35% from 2.5 billion in 2021 to 3.3 billion by 2030 (CAGR: 3.5%).
  • Given the solid economy and competitiveness of offshore business, fresh offshore investments should continue developing, boosting the shuttle tanker sector.
Oil transported by shuttle tankers
Source: Rystad Energy

Operational Performance

  • KNOP is profitable, unlike EDRY. Its November dividend was $0.52. The company’s distributable cash flow dropped from $24 million to $18.6 million.

EuroDry Limited (EDRY)

  • In January 2018, EuroDry was released from Euroseas. The company’s 9 dry bulk carriers have helped boost its share price by 250 percent in 2021 and 41 percent YTD.

Valuation

  • Both companies have good price-to-value ratios and perform well. 11x P/E, 1.8x P/S, and 0.90x P/B vs. 27x, 9.4x, and 2.7x. EDRY’s P/E, P/S, and P/B are 14, 1.98, and 1.47.

Conclusion

  • Companies that utilized volatility to improve their long-term positions through strategic investments have intrinsic upside in their equities. EDRY and KNOP outperformed.