Nordic American Tankers Limited (NAT) is a tanker firm that buys and charters double-hull tankers in Bermuda and across the world. It owns and operates 24 Suezmax crude oil tankers. Its shares have gained 18.9% year-to-date.
However, the stock is down 42.7% over the past year and 19.9% over the past month to close yesterday’s trading session at $2.01. Oil prices have soared back to levels seen during the early days of the Ukraine conflict, with little sight of major respite for drivers or companies in the near term. JPMorgan CEO Jamie Dimon believes oil prices will rise to $175 per barrel later this year.
NAT sold three of its 2002-built vessels in the first four months of 2022. While the firm has rebounded from its lows thanks to the current demand, its negative profit margins and widening loss could add to investors’ concerns.
Here's what could shape NAT's performance in the near term:
Inadequate Financials
NAT's net voyage revenue declined 17.5% year-over-year to $15.52 million for the first quarter ended March 31, 2022. Its net operating loss surged 13.8% from the prior-year quarter to $20.92 million. The company's net loss surged 7.8% from the year-ago value to $26.98 million. Its loss per share amounted to $0.14. In addition, its adjusted EBITDA came in at a negative $7.72 million, representing a year-over-year increase of 505.4%.
Negative Profit Margins
NAT's trailing-12-month asset turnover ratio of 0.21% is 60.2% lower than the industry average of 0.53%. Also, its trailing-12-month ROA, ROC, and net income margin are negative 20.9%, 6.5%, and 92.3%, respectively. Moreover, its trailing-12-month gross profit margin stood at a negative 4.46% compared to its industry average of 39.5%.
Premium Valuation
In terms of forward Price/Cash Flow, the stock is currently trading at 19.50x, 309.9% higher than the industry average of 4.76x. Also, its forward EV/Sales of 4.94x is 133.3% higher than the industry average of 2.12x.
POWR Ratings Reflect Bleak Outlook
NAT has an overall F rating, which equates to a Strong Sell in our proprietary POWR Ratings system. The POWR ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight different categories. NAT has an F for Value and a D for Growth and Quality. The stock's higher-than-valuations are in sync with the Value grade. In addition, the company's poor financials and profitability are consistent with the Growth and Quality grades.
Of the 45 stocks in the A-rated Shipping industry, NAT is ranked last.
Beyond what I've stated above, you can view NAT ratings for Stability, Momentum, and Sentiment here.
Bottom Line
Analysts expect NAT’s EPS to remain negative in the current year. Moreover, the stock is currently trading below its 50-day and 200-day moving averages of $2.46 and $2.14, respectively, indicating bearish sentiment. So, we think the stock is best avoided now.
How Does Nordic American Tankers Limited (NAT) Stack Up Against its Peers?
While NAT has an overall F rating, one might want to consider its industry peers, Overseas Shipholding Group Inc. (OSG), Matson Inc. (MATX), and Grindrod Shipping Holdings Ltd. (GRIN), which have an overall A (Strong Buy) rating.
NAT shares were trading at $2.01 per share on Wednesday morning, down $0.00 (0.00%). Year-to-date, NAT has gained 20.65%, versus a -20.05% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
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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