International Seaways, Inc. (INSW) is one of the world's major tanker companies, offering transportation services for crude oil and petroleum products in International Flag markets. IT has a fleet of 78 vessels, including 13 VLCCs, 13 Suezmaxes, five Aframaxes/LR2s, eight Panamaxes/LR1s, and 39 MR tankers.
INSW increased its quarterly dividend to $0.12 on June 07, 2022, payable on June 29, 2022. The stock pays a $0.48 per share dividend annually, translating to a 2.22% yield. Its shares are up 47.4% year-to-date.
However, the stock has plunged 7.8% over the past month to close yesterday’s trading session at $21.64. While the company’s triple-digit revenue growth should boost its operational growth, its negative profit margins and lack of profitability could add to investors’ concerns.
Here's what could shape INSW's performance in the near term:
Debt Financing
In May, INSW announced closing a new senior secured credit facility with an aggregate capacity of $750 million, comprised of a $530 million term loan and a $220 million revolving credit facility, of which $70 million was drawn on May 24, 2022. The facility's proceeds were used to repay three existing senior loan facilities totaling $575 million at the closure time.
Inadequate Financials
INSW's total shipping revenue increased 117% year-over-year to $101.48 million for the first quarter ended March 31, 2022. However, its total operating expenses grew 82.8% from the prior-year quarter to $107.11 million. Its loss from vessel operations came in at $5.63 million. The company reported a net loss of $13 million. Its loss per share amounted to $0.26. In addition, its cash and cash equivalents declined 23.8% for the three months ended March 31, 2022, to $74.55 million.
Negative Profit Margins
INSW's trailing-12-month gross profit margin of 20.2% is 49.7% lower than the industry average of 40.1%. Also, its trailing-12-month ROA, ROC, and net income margin are negative 5.6%, 2.13%, and 40.7%, respectively. Moreover, its trailing-12-month asset turnover ratio is 68.5% lower than its industry average of 0.53%.
POWR Ratings Reflect Bleak Outlook
INSW has an overall D rating, which equates to 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. INSW has a D grade for Quality. The company’s poor profitability is consistent with the Quality grade.
Of the 44 stocks in the A-rated Shipping industry, INSW is ranked #42.
Beyond what I've stated above, you can view INSW ratings for Growth, Stability, Value, Momentum, and Sentiment here.
Bottom Line
While the company has made several strategic advancements to boost its operational performance, its lack of profitability and high cash burn is concerning. In addition, given its negative profit margins, we think the stock is best avoided now.
How Does International Seaways (INSW) Stack Up Against its Peers?
While INSW has an overall D rating, one might want to consider its industry peers, Overseas Shipholding Group Inc. (OSG), Matson Inc. (MATX), and Grindrod Shipping Holdings Inc. (GRIN), which have an overall A (Strong Buy) rating.
INSW shares fell $0.57 (-2.63%) in premarket trading Wednesday. Year-to-date, INSW has gained 44.78%, versus a -22.11% 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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