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, Golden Ocean Group Limited (GOGL) is a shipping company that owns and operates a fleet of dry bulk vessels that comprise Newcastlemax, Capesize, Panamax, and Ultramax vessels worldwide.
Despite the resurgence of COVID-19 cases, intensified supply chain disruptions due to the Russia-Ukraine war have been beneficial for most shipping operators. In addition, increased demand for commodities bodes well for the shipping industry. Furthermore, rapid digitization, automation in logistics, and growing cargo shipping services across sectors are expected to drive the growth of the shipping market. According to a report by Market Research Future, the cargo shipping market is expected to grow at a 5.2% CAGR during 2022 - 2030. Therefore, both ZIM and GOGL should benefit.
GOGL stock has gained 33.7% in price over the past three months, while ZIM has returned 18.8%. However, ZIM’s 65.2% gains over the past nine months are significantly higher than GOGL’s 44.7% returns. Moreover, ZIM is the clear winner with 115.7% gains versus GOGL’s 70.8% returns in terms of the past year’s performance.
But which of these two stocks is a better buy now? Let’s find out.
Latest Developments
On March 30, 2022, ZIM announced a new charter transaction with a group of investors initiated by MPC Capital AG, according to which ZIM will charter a total of up to six 5,500 TEU wide beam new-build vessels for seven years, and a total charter hire consideration of approximately up to $600 million. This transaction could further strengthen its commercial prospects and support its long-term growth strategy.
On March 8, 2022, GOGL announced the sale of three of its oldest Panamax vessels, Golden Empress, Golden Enterprise, and Golden Endeavour, delivered in 2010 and 2011, as part of the company’s ongoing strategy to ensure that it operates a modern, fuel-efficient fleet with a reduced emissions profile.
Recent Financial Results
ZIM’s revenues increased 155% year-over-year to $3.47 billion for the fiscal fourth quarter ended December 31, 2021. The company’s adjusted EBITDA grew 345% year-over-year to $2.36 billion, while its net income came in at $1.71 billion representing a 366% year-over-year increase. Also, its EPS came in at $14.17, up 306% year-over-year.
GOGL’s revenues increased 126.3% year-over-year to $381.81 million for the fiscal fourth quarter ended December 31, 2021. The company’s adjusted EBITDA grew 310.5% year-over-year to $243.54 million, while its net income came in at $203.82 million representing a 703.4% year-over-year increase. Also, its EPS came in at $1.01, up 461.1% year-over-year.
Expected Financial Performance
Over the past three years, ZIM’s revenue and EBITDA grew at CAGRs of 48.9% and 268.2%. Analysts expect ZIM’s revenue to increase 39.7% for the quarter ending June 30, 2022, and 11.2% in fiscal 2022. The company’s EPS is expected to grow 48.1% for the quarter ending June 30, 2022, but decline 6% in fiscal 2022.
On the other hand, GOGL’s revenue and EBITDA grew at CAGRs of 22.2% and 35.3%, respectively, over the past three years. The company’s revenue is expected to decrease 10.1% for the quarter ending June 30, 2022, and 15.6% in fiscal 2022. Its EPS is expected to decline 11.7% for the quarter ending June 30, 2022, and 22.5% in fiscal 2022.
Profitability
ZIM’s trailing-12-month revenue is 8.94 times what GOGL generates. ZIM is also more profitable, with a gross profit margin and EBITDA margin of 63.59% and 54.66%, compared to GOGL’s 54.10% and 52.75%, respectively.
Furthermore, ZIM’s ROE, ROA, and ROTC of 190.77%, 57.28%, and 72.33% are higher than GOGL’s 31.98%, 10.28%, and 10.60%, respectively.
Valuation
In terms of forward non-GAAP P/E, GOGL is currently trading at 6.83x, 316.5% higher than ZIM’s 1.64x. Moreover, GOGL’s forward EV/EBITDA ratio of 7.12x is 673.9% higher than ZIM’s 0.92x.
So, ZIM is relatively affordable here.
POWR Ratings
ZIM has an overall rating of B, which equates to a Buy in our proprietary POWR Ratings system. On the other hand, GOGL has an overall rating of C, which translates to Neutral. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.
ZIM has an A grade for Value, consistent with its forward EV/S of 0.57x, 67% lower than the industry average of 1.74x. However, GOGL has a C grade for Value, in sync with its forward EV/S of 4.90x, 181.6% higher than the industry average of 1.74x.
Moreover, ZIM has a grade of A for Quality. This is justified given ZIM's 1.69% trailing-12-month asset turnover ratio, 117% higher than the industry average of 0.78%. On the other hand, GOGL has a Quality grade of C, in sync with its 0.39% trailing-12-month asset turnover ratio, 50.2% lower than the industry average of 0.78%.
Of the 45 stocks in the B-rated Shipping industry, ZIM is ranked #4. In comparison, GOGL is ranked #26.
Beyond what I have stated above, we have also rated the stocks for Growth, Sentiment, Momentum, and Stability. Click here to view all the ZIM ratings. Also, get all the GOGL ratings here.
The Winner
The shipping industry is expected to grow exponentially with increasing demand this year and beyond. While both ZIM and GOGL are expected to gain, it is better to bet on ZIM now because of its lower valuation and high 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.
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ZIM shares were trading at $55.98 per share on Thursday afternoon, down $3.42 (-5.76%). Year-to-date, ZIM has gained 17.88%, versus a -7.34% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
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.
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