Castor Maritime (NASDAQ:CTRM) stock has had a roller-coaster ride since the beginning of the year.
CTRM stock started 2021 at 19 cents and on Feb. 11 hit a multi-year high of $1.95. Now it is hovering around $0.45. Year-to-date (YTD) the shares have returned about 140%.
Limassol, Cyprus-based Castor Maritime, which was founded in 2017, is a diversified global shipping company. In 2020 it doubled the fleet size from three vessels to six. By the end of the year, it will have fourteen.
The group provides seaborne transportation services for dry bulk cargo, including iron ore, coal, grain, steel products, fertilizers, cement, bauxite, sugar, and scrap metal, among others.
The disruptive effect of the novel coronavirus caused a considerable decline in sea freight in the first half of 2020. Around 310 container ships remained idle in February 2020 alone according to Statista.
Global economic activities began going back to normal in late 2020, and international trade has now reached the pre-crisis level again, driven mainly by the manufacturing sector.
Meanwhile, several factors such as narrowed container supply and weak competition of air freight due to cancelled flights caused considerable increase in sea shipping costs. In addition, “surge in global oil and fuel prices further contributed to the spike in shipping costs.” Therefore, it has been a volatile year for most shipping businesses.
The Street closely watches the Baltic Exchange Dry Index (BDI), which tracks the rates shippers charge across more than 20 routes. It is up more than 135% year-to-date.
Against this improving economic backdrop, CTRM stocks could easily look attractive, especially for penny stock traders. But the company’s financial figures are not convincing enough to get bullish. Here’s why.
How Recent Earnings Came
At the end of March, Castor Maritime announced financial results for the three months and full year 2020. Revenues totaled $4.4 million for Q4 2020, as compared to $2.8 million for Q4 2019, a 57% YoY increase. In the last quarter of 2020, the company’s net loss was $0.8 million vs. a net profit of $0.5 million for Q4 2019.
Loss per share was 1 cent for Q4 2020 as compared to earnings per share of 20 cents for the last three months of 2019. Finally, the company ended the year with $8 million in cash and cash equivalents. The long-term debt stood at $11 million.
In early April, Castor Maritime sold over 192 million shares to institutional investors at a price of 65 cents per share. As a result, the group raised $125 million in cash. Needless to say, shareholders did not appreciate the substantial dilution. Since then, CTRM stock has decreased from about 75 cents to 45 cents.
Castor Maritime’s recent SEC filings further identify the risks that investors face. The company said that investing in CTRM stock is highly speculative and involves a “high degree of risk and uncertainty” due to sector volatility and industry fluctuations caused by the pandemic.
“We continue to steadily execute our expansion plan with the addition of another Kamsarmax dry bulk vessel, to Castor’s fleet,” CEO Petros Panagiotidis said. “Upon completion of all our announced acquisitions, our fleet will consist of 24 vessels across the dry bulk and tanker segments.”
The Bottom Line on CTRM Stock
As part of the global recovery, investors watch shipping indicators and companies. As a result, Castor Maritime has been getting significant attention. Meanwhile, the past year has seen many stocks rushing out of the gates. In early 2021, CTRM stock was one of them.
Yet owning a vessel is not cheap, and operating 24 vessels is an extensive and expensive business. In the past weeks, fundamental metrics have put serious pressure on the shares.
As a penny stock, daytraders play CTRM stock’s peaks and troughs regularly. Meanwhile, its price-to-sales (P/S) and price-to-book (P/B) ratios of 2.55 and 8.08 indicate that the stock is still overvalued.
On paper, CTRM can be an attractive penny stock, but taking risks does not always pay off.
Investors who believe in the comeback of overseas freight activities might also consider investing in a relevant exchange-traded fund (ETF).
Examples include the Breakwave Dry Bulk Shipping ETF (NYSEARCA:BDRY), the SPDR S&P Transportation ETF (NYSEARCA:XTN), the Direxion Daily Transportation Bull 3X Shares (NYSEARCA:TPOR) and the iShares Transportation Average ETF (BATS:IYT).
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all three levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.