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 Equity | 45.31% | 6.80% |
| Return on Assets | 21.79% | 3.33% |
| Return on Invested Capital | 16.03% | 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 Partners | YoY Growth | Industry Average | |
| Gross Margin | 68% | 123% | 85% |
| Operating Margin | 64% | 175% | 08% |
| Return on Invested Capital | 71% | 569% | 05% |
| Earnings per Share | $5.97 | 847% |
- 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.