ZIM vs. Seanergy: Which Marine Shipping Stock is a Better Buy?

Headquartered in Haifa, Israel, ZIM Integrated Shipping Services Ltd. (ZIM) provides international container shipping and related services. The company offers seaborne transportation and logistics services. In comparison, Athens, Greece-based Seanergy Maritime Holdings Corp. (SHIP) is an international shipping company that engages in the seaborne transportation of dry bulk commodities, primarily iron ore and coal worldwide.

Thanks to a significant supply and demand imbalance, most marine shipping operators have been witnessing solid demand. Furthermore, record high freight rates due to high post-pandemic demand for manufactured goods are helping maritime shipping companies expand their profit margins. Rapid digitization, automation in logistics, and growing cargo shipping services across industries are expected to drive the growth of the marine shipping market. According to a report by Market Research Future, the cargo shipping market is expected to grow at a 5.2% CAGR  from 2022 - 2030. Therefore, both ZIM and SHIP should benefit.

Over the past six months, ZIM shares have gained 6.3% in price, while SHIP has delivered negative returns. Also, ZIM’s 95.9% gains over the past nine months are significantly higher than SHIP’s negative returns.

But which of these two stocks is a better buy now? Let’s find out.

Latest Developments

On October 6,  ZIM created Ship4wd, a new digital freight forwarding platform subsidiary that offers an online, reliable, and straightforward self-service end-to-end shipping solution. Eli Glickman, ZIM President & CEO, said, “We are confident that with Ship4wd's excellent team it can become a significant player in the multi-billion-dollar freight forwarding industry as it will meet a much-needed demand for its services in the market."

On October 19, 2021, SHIP agreed to purchase a Capesize vessel. Stamatis Tsantanis, SHIP’s Chairman and CEO, said, “The addition of the M/V Dukeship will further enhance our operating leverage as a leading pure-play Capesize company and given the vessel’s prompt delivery in a strong Capesize market, the acquisition is expected to be immediately accretive for our shareholders.”

Recent Financial Results

ZIM’s revenues increased 210% year-over-year to $3.14 billion for its fiscal third quarter, ended September 30, 2021. The company’s adjusted EBITDA grew 693% year-over-year to $2.08 billion, while its net income came in at $1.46 billion, representing a 913% year-over-year increase. Also, its EPS was  $12.16, up 794% year-over-year.

SHIP’s revenues increased 146% year-over-year to $50 million for its fiscal third quarter, ended September 30, 2021. The company’s adjusted EBITDA grew 312% year-over-year to $32.17 million, while its net income came in at $20.06 million, representing a 459% year-over-year increase. Also, its EPS was  $0.12, up 50% year-over-year.

Past and Expected Financial Performance

Over the past three years, ZIM’s revenue and EBITDA have grown at CAGRs of 39.8% and 238.2%, respectively. Analysts expect ZIM’s revenue to increase 138% for the quarter ending December 31, 2021, and 161.4% in its fiscal year 2021. The company’s EPS is expected to grow 253.2% for the quarter ending December 31, 2021, and 619.7% in its fiscal 2021.

In comparison, SHIP’s revenue and EBITDA have grown at CAGRs of 9.9% and 29.1%, respectively, over the past three years. The company’s revenue is expected to increase 161.3% for the quarter ending December 31, 2021, and 149.6% in its fiscal 2021. Its EPS is expected to grow 566.7% for the quarter ending December 31, 2021, and 149.1% in fiscal 2021.

Profitability

ZIM’s $8.62 billion trailing-12-month revenue is significantly higher than SHIP’s $117.72 million. ZIM is also more profitable, with a gross profit and net income margins of 57.40% and 38.27%, respectively, compared to SHIP’s 55.74% and 15.62%.

Furthermore, ZIM’s 214.73%, 51.32%, and 68.44% respective ROE, ROA, and ROTC are higher than SHIP’s 11.91%, 6.03%, and 6.57%.

Valuation

In terms of forward non-GAAP P/E, SHIP is currently trading at 4x, which is 215% higher than ZIM’s 1.27x. And SHIP’s 3.86x forward EV/EBITDA ratio is 302.1% higher than ZIM’s 0.96x.

So, ZIM is relatively affordable here.

POWR Ratings

ZIM has an overall A rating, which equates to a Strong Buy in our proprietary POWR Ratings system. In comparison, SHIP has an overall C rating, which translates to Neutral. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

ZIM has an A grade for Value, which is consistent with its 0.58x forward EV/S, which is 71.4% lower than the 2.04x industry average. However, SHIP has a C grade for Value, which is in sync with its 2.33x forward EV/S, which is 14.1% higher than the 2.04x industry average.

Also,  ZIM has a B grade for Quality. This is justified given ZIM's 42.08% trailing-12-month ROTA, which is 717.8% higher than the 5.15% industry average. In contrast, SHIP has a Quality grade of C, which is in sync with its 3.95% trailing-12-month ROTA, which is 23.2% lower than the 5.15% industry average.

Of the 46 stocks in the Shipping industry, ZIM is ranked #4. In comparison, SHIP is ranked #29.

Beyond what I have stated above, we have also rated the stocks for Momentum, Growth, Stability, and Sentiment. Click here to view all the ZIM ratings. Also, get all the SHIP ratings here.

The Winner

The marine shipping industry is expected to grow rapidly  with increasing demand this year and beyond. While both ZIM and SHIP are expected to gain, we think it is better to bet on ZIM now because of its lower valuation and higher profitability.

Our research shows that odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the other top-rated stocks in the Shipping industry here.

ZIM shares were trading at $46.74 per share on Wednesday morning, down $1.46 (-3.03%). Year-to-date, ZIM has gained 306.43%, versus a 24.90% rise in the benchmark S&P 500 index during the same period.

Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.

More...