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DryShips Fundamentals Compared to the Marine Transportation Industry

By Edited Nov 13, 2013 0 0

DryShips Inc (NASDAQ:DRYS) is a company that provides ocean transportation services of dry bulk cargoes worldwide through the ownership and operation of the dry bulk carrier vessels. It is a wildly popular stock to trade by day traders, value investors, penny stock pickers and other technical traders and is highly leveraged to the economic cycle. It rose from less than $10 in 2006 to over $120 in 2007 but since the market crash of 2008, it has struggled to keep above the $5 mark. The cheap price relative to former highs attracts value investors seeking a return to its past glory; however I will compare their data to data of other shippers to see how they measure up. The companies I will compare DRYS to are:


Diana Shipping Inc NYSE:DSX
Eagle Bulk Shipping Inc NASDAQ:EGLE
Excel Maritime Carriers Ltd NYSE:EXM
Genco Shipping & Trading Ltd NYSE:GNK
Hornbeck Offshore Services Inc NYSE:HOS
Navios Maritime Holdings Inc NYSE:NM
Nordic American Tanker Shipping Ltd NYSE:NAT


Price to Book Value

Book value is relatively low for this industry as a high amount of capital is locked up in specialized, illiquid assets like vessels. DRYS and several of its other competitors are currently trading at half of their book value or less. This can be seen as an opportunity to buy these companies cheaply, but it also shows investor hesitation as many of these companies are highly leveraged with debt in an industry that is cyclical. This means that they have a higher than average chance of getting into financial trouble.

EXM............0.3
DRYS..........0.5
EGLE..........0.5
GNK...........0.5
NM.............0.5
HOS............0.7
DSX.............1.0
NAT............1.2
Industry…1.5


Price to Earnings

DRYS P/E metric seems inferior to most of their competitors, particularly against those companies with similar high levels of debt.

EXM.............1.7
GNK.............3.4
NM...............5.7
DSX..............8.8
EGLE...........12.0
HOS.............13.9
DRYS...........21.5
Industry…30.0
NAT...........166.5


Price to Sales

The P/S metric tells much of the same story as the P/E metric.

EXM.............0.6
NM...............0.8
GNK..............1.3
EGLE............1.3
HOS..............1.4
DRYS...........1.8
Industry...2.8
DSX.............4.2
NAT............9.4


Profit Margin

The risk that DRYS shareholders take is shown through its profit margin. Their margin is very thin at the moment and is only comparable to NAT's margin, a company that has mitigated its risk by having minimal debt. When using this metric, investors may consider EXM over DRYS as both companies are similarly undervalued from a P/B level and have similar debt levels, but EXM has vastly superior margins and earnings ratios.

DSX.............47.16%
EXM............38.74%
GNK............35.09%
NM..............16.28%
Industry...11.50%
EGLE...........11.08%
HOS.............10.47%
DRYS.............7.86%
NAT..............5.99%


Debt to Capital

It is no coincidence that the ranking of the Debt to Capital metric is almost the inverse of the P/B metric. NAT and DSX have little or no debt and they trade at or above book value, reflecting investor sentiment that they have no chance of going bankrupt. If they ever choose to liquidate assets they can do so at their own terms and price.

NAT...............0%
DSX..............21%
Industry...43%
EXM............45%
HOS.............48%
DRYS...........48%
GNK.............58%
EGLE............59%
NM...............60%


Current Ratio

The current ratio is a reflection of a company's solvency - their short term assets vs their short term liabilities. NAT and DSX are once again at the top of the list while EXM and DRYS look to have working capital issues.

NAT...........30.5
DSX............11.1
Industry...4.4
HOS.............4.0
EGLE...........3.7
GNK............2.5
NM..............1.2
EXM............0.6
DRYS..........0.5

It's because of this high leverage and high risk that DRYS has such large stock price swings. On the one hand if things work out well with the global economy, DRYS shareholders will benefit the most from the increased economic activity because the stock will be very leveraged to the upside. However, the company also has by far the greatest chance of failure. Given its high risk and no distinct advantage over its competitors on any of these key fundamental ratios, I can not give a buy recommendation based on fundamentals. You may be able to trade DRYS based on technical analysis when appropriate.

My investment blog

Disclaimer: I do not own any of the companies analyzed in this article. All financial information was taken from TD Waterhouse and Yahoo Finance as of December 2, 2010.

Click here to see similar analysis for YRCW

Refer to my other investment articles if you are interested in learning about:

Junior Gold Explorers

Biotech Stocks and Beaten Down Biotech Stocks

Natural Gas

Canadian Bank Stocks

Penny Stocks


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