Global Ship Lease is today's pick for IBD 50 Stocks To Watch, as it etches a new base. The stock move is underpinned by a recovery in earnings growth and improved outlook for the shipping industry. With its sails set for potentially breaking out to a new high, this is a growth stock to watch.
Global Ship Lease is registered in the Marshall Islands with offices in London and Athens, Greece. The company owns 65 container ships that it charters out under long-term contracts to shipping firms. It's involved in the operation and management of its vessels.
Global Ship Lease has a best-possible 99 Composite Rating, according to Stock Checkup. That means it ranks among the top 1% of stocks in terms of overall fundamental and technical strength.
The company ranks No. 4 in the ship transportation group, which itself ranks No. 14 among IBD's 197 industry groups based on six-month performance. The group has made a powerful climb up from No. 67 three weeks ago and No. 156 six weeks ago.
Global Ship Lease's earnings growth is on the rebound after profit sank 97% in the first quarter. Earnings per share jumped 200% in Q2, and 110% from a year earlier to $1.74 in Q3. Sales growth has throttled higher too, increasing from 3% to 16% and 96% in those periods.
Another factor that makes Global Ship Lease a growth stock to watch is its dividend yield: 4% at an annualized rate. That's way above the S&P 500's yield of 1.32%.
Growth Stocks To Watch: Earnings
In Global Ship Lease's Q3 earnings release, Executive Chairman George Youroukos said, "Driven by the continued strength of underlying containerized freight volumes, supply chain congestion that shows little sign of near-term resolution, and the heightened competition between the liner companies to secure containership capacity, the demand for high-quality midsized and smaller container ships like those in the GSL fleet is as strong as it has ever been.
"With few new vessels delivering in our target size segments through at least 2023/2024," he added, "liner companies have been willing to pay attractive charter rates well above those available in the market in recent years."
Consensus estimates from analysts tracked by FactSet put EPS at $1.39 for Q4, up 117% from the year before. Sales are seen jumping 81% to $127 million.
For the full 2021, Wall Street forecasts EPS of $3.67, up 132%, on sales of $394.3 million, up 39%.
Stock Already A Top Performer
GSL stock has climbed about 112% since the start of 2021. Along the way it's formed and broken out of several bases. This week finds Global Ship Lease climbing the right side of a new cup base that stretches back 10 weeks to a high of 26.51 on Nov. 11, according to MarketSmith's pattern recognition.
From there the stock dipped 25% to a low of 19.86 on Dec. 15. In the process, it undercut the low of the previous consolidation, which reset the stock's base count. From its low, the stock then came about and started to tack up the right side of the base. GSL stock is about 6% below its buy point of 26.61.
Watch to see if the stock drifts lower from this level for a week or more to form a handle, which would offer an earlier entry point.
Shipmates in Global Ship Lease's industry group that fly the perfect 99 Composite Rating flag include Costamare, Capital Production Partners and Matson, which is trying to break out of a base.
With the stock market in correction, this is not an ideal time to be buying stocks. But it's a good practice to keep growth stocks to watch on a list close at hand because a follow-through day confirming a new rally is potentially never more than a few days away.
