Seanergy Maritime Holdings Corp. (SHIP) is the first publicly traded pure-play Capesize ship owner in the United States. The company operates a modern fleet of Capesize vessels for maritime dry bulk shipping.  SHIP operated a fleet of 11 Capesize vessels as of February 19, 2021.

SHIP’s shares have declined 28.1% in price over the past month to close yesterday’s trading session at $1.10. The stock is currently trading 55.1% below its 52-week high of $2.45, which it hit on February 26, 2021, indicating bearish investor sentiment.

Though the shipping and freight industry is witnessing a spike in demand ahead of the holiday season, an ongoing labor shortage at U.S. ports and a market supply-demand imbalance have caused historic cargo-ship backlogs. This could negatively impact SHIP’s growth prospects in the near term.

Here’s what could influence SHIP’s performance in the upcoming months:

Industry Challenges

An unprecedented cargo ship backlog has severely hamstrung the supply chain and shipping sector. According to Goldman Sachs, 77 ships are waiting outside docks in Los Angeles and Long Beach, Calif., carrying $24 billion worth of products seeking to enter the U.S. In addition, in September, approximately one-third of containers at the Los Angeles and Long Beach ports lingered there for more than five days before being sent out. The shortage of workers nationwide--from dock workers to truckers and warehouse workers--is affecting the operations of companies in this space, which is raising investor concerns.

Poor Profitability

SHIP’s 2.1% trailing-12-months net income margin is 63.4% lower than the 5.8% industry average. Also, its 3.1% and 0.4% respective ROC and ROE are lower than the 6.5% and 88.4% industry averages. Furthermore, $20.91 million trailing-12-months cash from operations is 90.7% lower than the $224.97 million industry average.

Discounted Valuation

In terms of non-GAAP forward P/E, the stock is currently trading at 3.92x, which is 80.6% lower than the 20.28x industry average. Also, its 1.18x forward Price/Sales multiple is 23.9% lower than the 1.55x industry average. Furthermore, SHIP’s 4.15x forward EV/EBITDA is 66.6% lower than the 12.41x industry average.

The stock’s 0.80x forward Price/Book multiple is 74.6% lower than the 3.13x industry average.

POWR Ratings Reflect Uncertainty

SHIP has an overall C rating, which equates to Neutral in our proprietary POWR Ratings system. The POWR ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. SHIP has an F grade for Stability. The company’s higher volatility than its industry peers justifies the Stability growth.

The stock also has a D grade for Quality. SHIP’s poor profitability is consistent with the Quality grade.

Of the 47 stocks in the C-rated Shipping industry, SHIP is ranked #34.

Beyond what I’ve stated above, you can view SHIP ratings for Growth, Value, Momentum, and Sentiment here.

Bottom Line

The shipping and freight industry is experiencing heightened demand for services ahead of the holiday season. However, companies are finding it challenging to keep up with rising demand due to a persistent labor shortage. In addition, SHIP’s profit margins are much lower than its peers. Because analysts believe the shipping industry’s problems will continue, this could pose a further threat to the company’s future performance. Thus, we think investors should wait for the industry’s prospects to stabilize before investing in the stock.

How Does Seanergy Maritime Holdings Corp. (SHIP) Stack Up Against its Peers?

While SHIP has an overall C rating, one might want to consider its industry peer, Matson Inc. (MATX), with an  overall A (Strong Buy) rating and Safe Bulkers Inc. (SB), and ZIM Integrated Shipping Services Ltd. (ZIM) with overall B (Buy) ratings

SHIP shares fell $1.10 (-100.00%) in premarket trading Friday. Year-to-date, SHIP has gained 104.61%, versus a 23.78% rise in the benchmark S&P 500 index during the same period.

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.

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