The major equity indices are trading near all-time highs. However, if you look closer, the rally has been driven by outperformance in a handful of mega-cap tech stocks such as Nvidia (NVDA), Meta (META), and Amazon (AMZN).
Alternatively, several stocks across various sectors are trading below record levels, making them attractive to value investors. For instance, the Russell 2000 Index (RUT) of small-cap stocks is down 17.3% from all-time highs, allowing you to buy the dip.
In fact, the small-cap index ended 2023 with a price-to-book ratio of 0.41x, which is similar to the levels seen in 1999. Investors should note that small-cap stocks outpaced large-caps for 12 years between 1999 and 2011.
Here is one value-priced Russell 2000 stock that you can consider buying right now.
An Overview of Costamare
Valued at a market cap of $1.3 billion, Costamare (CMRE) is among the world’s leading owners and providers of containerships and dry bulk vessels for charter. It has a fleet of 68 containerships with a total capacity of 513,000 TEU (twenty-foot equivalent units) and 51 dry bulk vessels with a capacity of 2,719,000 DWT (deadweight tonnage).
Costamare has a dry bulk operating platform that charters in/out dry bulk vessels and enters into affreightment contracts and forward freight agreements. It also participates in a leasing business that offers financing to third-party owners.
How Did Costamare Perform in 2023?
In 2023, Costamare reported an adjusted net income of $249 million, or $2.07 per share. It also reported revenue of $1.5 billion in 2023, and ended the year with close to $1 billion in total liquidity.
The company entered the dry bulk sector in 2021, and has since invested $200 million in the new venture. It now aims to renew the dry bulk fleet and increase its average size. Comparatively, its Neptune Maritime Leasing Business has concluded leasing transactions for 23 ships totaling $250 million. Costamare is focused on growing the leasing business on the back of a healthy pipeline.
Costamare operates a high-margin business, allowing it to pay shareholders an annualized dividend of $0.46 per share, translating to a forward yield of 4.1%.
The small-cap shipper reported an operating cash flow of $331.3 million in 2023 and invested more than $282 million in capital expenditures, indicating a free cash flow of $49 million. Given its outstanding share count, it paid shareholders over $50 million in annual dividends, suggesting the stock has a payout ratio of more than 100%.
What is the Target Price for Costamare Stock?
Out of just three analysts covering CMRE stock, one recommends a “strong buy,” and two recommend a “hold.” The average target price for the small-cap shipping stock is $11.17, a slight discount to Thursday's close.
However, CMRE could be a bargain at current levels.
Earlier this year, the attack by Houthi rebels on shipments passing through the Red Sea resulted in higher tanker prices. In late January, a few oil tankers earned over $100,000 a day due to the increase in shipping prices. This supply chain disruption may act as a tailwind for Costamare's earnings in the near term.
Costamare is forecast to end 2024 with adjusted earnings of $2.75 per share, indicating a forward earnings multiple of just 4x.
On the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
