BUSINESS
Nordic American Tankers Limited, a tanker company, acquires and charters double-hull tankers in Bermuda and internationally. It operates a fleet of 24 Suezmax crude oil tankers. The company was formerly known as Nordic American Tanker Shipping Limited and changed its name to Nordic American Tankers Limited in June 2011. The company was incorporated in 1995 and is based in Hamilton, Bermuda.
INVESTMENT RATING
NAT is expected to be a major Value Builder reflecting capital returns that are forecasted to exceed the cost of capital.
Nordic American Tankers has a current Value Trend Rating of C (High Neutral).
The Value Trend Rating reflects contradictory signals from PTR’s two proprietary measures of a stock’s attractiveness. Nordic American Tankers has a slightly negative Appreciation Score of 38 but a good Power Rating of 79, and the High Neutral Value Trend Rating results.
Nordic American Tankers’ stock is selling at targeted value. The current stock price of $4.06 compares to targeted value 12 months forward of $4.
This moderately low appreciation potential results in an appreciation score of 38 (62% of the universe has greater appreciation potential.)
Nordic American Tankers has a Power Rating of 79. (This good Power Rating indicates that NAT has a better chance of achieving attractive investment performance over the near to intermediate term than all but 21% of companies in the universe.)
Factors contributing to this good Power Rating include: the Water Transportation comparison group is in a strong phase currently; recent price action has been favorable; and earnings estimate behavior for NAT has been slightly favorable recently.
INVESTMENT PROFILE
NAT’s financial strength is average. Financial strength rating is 43.
Relative to the S&P 500 Composite, Nordic American Tankers Ltd has moderate Value characteristics; its appeal is likely to be to investors heavily oriented toward Income; the perception is that NAT is normal risk. Relative weaknesses include: low historical profitability, low financial strength, low expected growth, low historical growth, and high earnings variability. NAT’s valuation is low: high dividend yield, low P/E ratio, and low price/book ratio. NAT has unusually low market capitalization.
CURRENT SIGNALS
Nordic American Tankers’ current operations are strong. Return on equity is rising, reflecting: improving asset utilization; widening pretax margins; and rising leverage.
Nordic American Tankers’ current technical position is mixed. The stock price is in a 1.4 month down move. The stock has declined 15.9% from its prior high. The 200 day moving average is in an uptrend. The stock price is below its 200 day moving average.
ALERTS
Recent meaningful negative changes in fundamentals have impacted Nordic American Tankers Ltd (NYSE: NAT): the consensus estimate for December, 2024 decreased significantly, significant quarterly earnings deceleration occurred, and the consensus estimate for December, 2025 decreased significantly.
The stock is currently rated C.
On 3/14/24, Nordic American Tankers Ltd (NYSE: NAT) stock rose modestly by 1.0%, closing at $4.06. However, this advance was accompanied by below average trading volume at 74% of normal. Relative to the market the stock has been strong over the last nine months and is unchanged during the last week.
CASH FLOW
In 2022, Nordic American Tankers generated a very significant increase in cash of +$18.65 million (+42%). Sources of cash were much larger than uses. Cash generated from 2022 EBITDA totaled +$86.60 million. Non-operating sources contributed +$6.80 million (+8% of EBITDA). In 2022, there were no cash taxes paid. Re-investment in the business amounted to -$57.99 million (-67% of EBITDA). On a net basis, debt investors received -$43.39 million (-50% of EBITDA) while equity investors contributed +$26.66 million (+31% of EBITDA).
NAT’s Non-operating Income, %EBITDA has enjoyed a volatile overall uptrend over the period. This improvement was accompanied by an opposite trend for the Nordic American Tankers Peer Group. In most years, Nordic American Tankers was in the top quartile and lower quartile. Currently, Nordic American Tankers is upper quartile at +8% of EBITDA (+$6.80 million).
NAT’s Cash Taxes, %EBITDA has exhibited little to no overall change over the period. This stability was accompanied by stability for the Nordic American Tankers Peer Group as well. In most years, Nordic American Tankers was in the second quartile and top quartile. Currently, Nordic American Tankers is at the upper quartile at 0% of EBITDA ( $0.00 million).
NAT’s Business Re-investment, %EBITDA has suffered a very strong overall downtrend over the period. This downtrend was accompanied by an opposite trend for the Nordic American Tankers Peer Group. (Since 2017 Business Re-investment, %EBITDA has decelerated very sharply.) In most years, Nordic American Tankers was in the second quartile and top quartile. Currently, Nordic American Tankers is lower quartile at -67% of EBITDA (-$57.99 million).
NAT’s Debt Investors, %EBITDA has experienced a downtrend over the period. This downtrend was accompanied by a similar trend for the Nordic American Tankers Peer Group. In most years, Nordic American Tankers was in the top quartile and third quartile. Currently, Nordic American Tankers is substantially below median at -50% of EBITDA (-$43.39 million).
NAT’s Equity Investors, %EBITDA has enjoyed a volatile overall uptrend over the period. This improvement was accompanied by an opposite trend for the Nordic American Tankers Peer Group. In most years, Nordic American Tankers was in the lower quartile and top quartile. Currently, Nordic American Tankers is at the upper quartile at +31% of EBITDA (+$26.66 million).
NAT’s Change in Cash, %EBITDA has experienced a very strong overall uptrend over the period. This improvement was accompanied by stability for the Nordic American Tankers Peer Group. In most years, Nordic American Tankers was in the top quartile and lower quartile. Currently, Nordic American Tankers is upper quartile at +22% of EBITDA (+$18.65 million).
NAT’s Cash, %Revenue has exhibited little to no overall change over the period. This stability was accompanied by stability for the Nordic American Tankers Peer Group as well. In most years, Nordic American Tankers was in the second quartile and top quartile. Currently, Nordic American Tankers is above median at +19%.
PROFITABILITY
NAT’s return on equity has improved very significantly since 2015. The current level is 22.0% versus the high of 13.0% and the low of -34.4%.
NAT’s very strong positive trend in pretax operating return significantly augmented by a very strong positive trend in non-operating factors is a significant analytical factor.
The productivity of NAT’s assets rose over the full period 2013-2023: asset turnover has enjoyed a very strong overall uptrend that accelerated very sharply after the 2021 level.
Reinforcing this trend, pretax margin enjoyed a volatile overall uptrend that accelerated very sharply from the 2021 level.
Non-operating factors (income taxes and financial leverage) had a very significant positive influence on return on equity.
NAT’s return on equity is upper quartile (22.0%) for the four quarters ended September, 2023.
Operating performance (pretax return on assets) is upper quartile (14.0%) reflecting asset turnover that is upper quartile (0.49X) and pretax margin at the upper quartile (28.7%).
Tax “keep” rate (income tax management) is at the upper quartile (100.0%) resulting in after tax return on assets that is upper quartile.
Financial leverage (leverage) is substantially below median (1.57X).
GROWTH RATES
There are no significant differences between Nordic American Tankers’ longer term growth and growth in recent years.
Nordic American Tankers’ historical income statement growth and balance sheet growth have diverged. Revenue growth has paralleled asset growth; earnings growth has fallen short of equity growth.
Annual revenue growth has been -9.7% per year.
Total asset growth has been -13.3% per year.
Annual E.P.S. growth has been -20.8% per year.
Equity growth has been -15.2% per year.
No consensus growth rate forecast is available for Nordic American Tankers.
Relative to the Nordic American Tankers Peer Group, Nordic American Tankers’ historical growth measures are consistently lower quartile. Revenue growth (-9.7%) has been lower quartile. Total asset growth (-13.3%) has been lower quartile. E.P.S. growth (-20.8%) has been lower quartile. Equity growth (-15.2%) has been lower quartile.
Consensus growth forecast is unavailable.
PRICE HISTORY
Over the full time period, Nordic American Tankers’ stock price performance has been volatile and significantly below market. Between May, 2013 and March, 2024, Nordic American Tankers’ stock price fell -52%; relative to the market, this was a -85% loss. Significant price moves during the period: 1) May, 2022 – February, 2023: +116%; 2) April, 2020 – January, 2022: -74%; 3) August, 2019 – December, 2019: +176%; and 4) April, 2016 – April, 2018: -88%.
TOTAL INVESTMENT RETURNS
Current annual total return performance of 3.8% is below median relative to the S&P 500 Composite.
In addition to being below median relative to S&P 500 Composite, current annual total return performance through February, 2024 of 3.8% is slightly above median relative to Nordic American Tankers Ltd Peer Group.
Current 5-year total return performance of 19.8% is upper quartile relative to the S&P 500 Composite.
Through February, 2024, with upper quartile current 5-year total return of 19.8% relative to S&P 500 Composite, Nordic American Tankers’ total return performance is at the upper quartile relative to Nordic American Tankers Ltd Peer Group.
VALUATION BENCHMARKS
Relative to S&P 500 Composite, NAT’s overall valuation is quite low. The highest factor, the ratio of enterprise value/assets, is below median. Ratio of enterprise value/revenue is below median. Price/equity ratio is lower quartile. Ratio of enterprise value/earnings before interest and taxes is lower quartile. The lowest factor, the price/earnings ratio, is lower quartile.
Relative to Nordic American Tankers Peer Group, NAT’s overall valuation is normal. The highest factor, the ratio of enterprise value/assets, is upper quartile. Price/equity ratio is at the upper quartile. Ratio of enterprise value/revenue is at median. Price/earnings ratio is lower quartile. The lowest factor, the ratio of enterprise value/earnings before interest and taxes, is at the lower quartile.
Nordic American Tankers has a very large value gap compared to median valuation. For NAT to fall to lower quartile valuation, its current ratio of enterprise value/revenue would have to decline from the current level of 2.70X to 2.14X. If NAT’s ratio of enterprise value/revenue were to decline to 2.14X, its stock price would be lower by $-1 to $3.
For NAT to achieve upper quartile valuation relative to the Nordic American Tankers Peer Group, its current ratio of enterprise value/revenue would have to rise from the current level of 2.70X to 4.68X. If NAT’s ratio of enterprise value/revenue were to rise to 4.68X, its stock price would increase by $4 from the current level of $4.06.
VALUE TARGETS
NAT is expected to be a major Value Builder reflecting capital returns that are forecasted to exceed the cost of capital.
Nordic American Tankers’ current Price Target of $4 represents a +5% change from the current price of $4.06.
This moderately low appreciation potential results in an appreciation score of 38 (62% of the universe has greater appreciation potential.)
Notwithstanding this moderately low Appreciation Score of 38, the high Power Rating of 79 results in an Value Trend Rating of C.
Nordic American Tankers’ current Price Target is $4 (+32% from the 2022 Target of $3 and +5% from the 03/14/24 price of $4.06). This rise in the Target is the result of a -10% decrease in the equity base and a +47% increase in the price/equity multiple. One Driver has a positive impact on the price/equity multiple, one has a negative impact, and one has no effect. The forecasted increase in return on equity has a huge positive impact on the price/equity multiple. The forecasted growth has no impact. The forecasted increase in cost of equity has a very large negative impact.
PTR’s return on equity forecast is 26.0% — substantially above our recent forecasts. Forecasted return on equity erratic but little changed between 2014 and 2022. The current forecast is significantly above the 2019 low of 4%.
PTR’s growth forecast is 0.0% — in line with our recent forecasts. Forecasted growth erratic between 2014 and 2022. The current forecast is steady at the 2014 peak of 0%.
PTR’s cost of equity forecast is 14.4% — substantially above recent levels. Forecasted cost of equity suffered a dramatic, erratic increase between 2014 and 2022. The current forecast is significantly above the 2014 low of 3.2%.
At Nordic American Tankers’ current price of $4.06, investors are placing a negative value of $-2 on its future investments. This view is not supported by the company’s most recent performance that reflected a growth rate of 0.0% per year, and a return on equity of 4.4% versus a cost of equity of 3.6%.
PTR’s 2024 Price Target of $4 is based on these forecasts and reflects an estimated value of existing assets of $4 and a value of future investments of $-0.
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