Navios Maritime Partners

Stock: NMM

Rating: Strong Buy

Author: Waleed M. Tariq

Overview

  • NMM was formed in August 2021 when Navios Maritime Acquisition Corp. and Navios Maritime Partners L.P. amalgamated.
  • The company operates 54 dry bulk boats, 45 tankers, and 43 containerships of 14.6 million DWT and 215,222 TEU (TEU).
  • The company’s stock is about $27 with a market valuation of $825 million.

Bullish

  • After merging, Navios Maritime Partners became public in August. It has a strong balance sheet, strong revenues, and ambitious growth ambitions.
  • The company boasts over 90% fleet utilization, growing profitability, and $2.2 billion in contracted revenue.
  • NMM grew its fleet by 163% this year and aims to capitalize on rising demand and charter prices.

Bearish

  • What if charter rates don’t keep up with the uptrend? If aggressive supply growth exceeds demand, rates will decrease and normalize at a lower level.

Stocks undervalued

  • The company’s P/E ratio of 1.54 ($27.31/$17.68) is substantially above the industry median of 20.88.
  • Based on current EPS and industry P/E ratio, the share price is $369 (20.88 * $17.88).
  • The company’s P/S ratio is also higher than the industry median of 1.25 ($27/$27) and its P/B ratio is 0.49 ($27/$55.56) relative to 1.14.
  • All 3 ratios indicate that the shares are undervalued, and a kickback will likely increase the share price.

Above Average Resource Utilization

  • Management’s capacity to maximize results and resources shows the company’s financial strength. First-half 2021 fleet utilization was 99.3%.
  • The company’s ROE, ROA, and ROIC show excellent resource usage.

Navios Maritime Partners
Industry Average
Return on Equity45.31%6.80%
Return on Assets21.79%3.33%
Return on Invested Capital16.03%5.34%

Rapid growth

  • 88 ships were added, up 163%. Credit and cash financed it. Annual CAPEX is $263 million ($263/$514). The corporation spends heavily in productive assets, which enhances its earnings.

Profitability

  • Revenue grew 50% quarter-over-quarter and 253% year-over-year. Table compares recent company profit margins to last year’s and industry averages.
Navios Maritime PartnersYoY GrowthIndustry Average
Gross Margin68%123%85%
Operating Margin64%175%08%
Return on Invested Capital71%569%05%
Earnings per Share$5.97847%
  • Last year, the company grew rapidly. Its profit margins prove its profit-making capability and high resource utilization ratios.

Dividends

  • Since MRQ, the firm has paid a $0.05 per share dividend. 0.75 percent dividend yield, 1.1% dividend payout ratio. This shows that the company is expanding.

Conclusion

  • Assume the company has great retention and contracts. Investors will get good quarterly returns. Strong balance sheet and capital management boost long-term potential. NMM’s cheap stock is attractive.