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Eagle Bulk Shipping Stock Analysis | EGLE Stock | $EGLE Stock Analysis | Best Stock to Buy Now? - YouTube
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hello and welcome back to global value in today's聽
video we'll be performing a fundamental stock聽聽
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analysis of eagle bulk shipping inc ticker symbol聽
e-g-l-e at the time of recording this video eagle聽聽
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is trading for just over 72 dollars per share聽
their stock has done quite well year-to-date聽聽
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they're up nearly 61 percent over the past year聽
they're up about 55 however since they went public聽聽
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you would have done quite well if you had shorted聽
the company but you would not have wanted to聽聽
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purchase this on the open market after its ipo聽
still in the last five years it's up nearly 18聽聽
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compounded annually even with this big dip during聽
2020. so we can see that eagle is just off of its聽聽
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52-week high which is nearly double its 52-week聽
low there's about nine percent short interest on聽聽
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the business currently and the business is about a聽
one billion dollar market cap for some background聽聽
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about what the business does eagle bulk shipping聽
inc operates in the shipping and logistics聽聽
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industry it's engaged in the ocean transportation聽
of dry built cargoes through the ownership charter聽聽
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and operations of dry bulk vessels the company's聽
fleet is comprised of supramax and ultramax bulk聽聽
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carriers the firm provides the following services聽
commercial operations and technical supervision聽聽
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vessel maintenance and repair vessel acquisition聽
and sales finance accounting treasury and聽聽
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information technology services and legal聽
compliance and insurance services it transports聽聽
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a broad range of major and minor bulk cargos聽
including coal grain ore pet coke cement and聽聽
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fertilizer eagle bulk shipping was incorporated in聽
2005 and is headquartered in stamford connecticut聽聽
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so with that background about what the business聽
does let's get right into our fundamental analysis聽聽
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we'll be performing an eight pillar analysis as聽
popularized by everything money taking a look聽聽
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at eight different financial metrics to come to a聽
holistic comprehensive beginning understanding of聽聽
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the business so let's dive right into our analysis聽
starting right off with pillar number one we want聽聽
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their average pe over the last five years to be聽
below 22 and a half so currently we can see that聽聽
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eagles trading at just over a five times earnings聽
multiple their earnings have been all over the聽聽
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place over the last five years and they've聽
averaged out at about one so even though this is a聽聽
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check to start there's not a lot of validity here聽
as their earnings have been all over the place聽聽
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very uh helter skelter here so that is a check on聽
pillar number one but again you don't want to put聽聽
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too much weight on that pillar number two we want聽
their average five-year return on capital to be聽聽
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above nine percent so over the long run a stock聽
is going to return what its underlying business聽聽
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returns and the underlying business returns are聽
going to be this return on capital so we can see聽聽
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that they've done quite well during the shipping聽
boom of the past year or so but actually three out聽聽
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of these five years they had negative returns on聽
capital they average about a 5.7 return on capital聽聽
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which is below that nine percent metric so pillar聽
number two is gonna be our first x we're one and聽聽
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one to start pillar number three we're looking聽
for five-year revenue growth this one's gonna be聽聽
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a check they've grown revenues from 237 million聽
dollars in 2017 to 595 million in 2021 one thing聽聽
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to note is that almost all of this growth came聽
between 2020 and 2021 which makes sense as the聽聽
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cost of shipping has skyrocketed over this time聽
period so that's a check on pillar number three聽聽
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pillar number four we want to see five-year聽
net income growth this one's also a check聽聽
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they had negative net income in 2017 and they have聽
a positive 185 million dollars of earnings in 2021聽聽
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so again three out of the five years here they had聽
negative net income but they had quite a boom this聽聽
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past year and that's gonna be a check so far we're聽
three for four pillar number five we're looking聽聽
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at shares outstanding we don't want a business聽
to be issuing new shares and deluding existing聽聽
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shareholders so we want them to be keeping this聽
flat or even better purchasing back shares when聽聽
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the business is reasonably valued we can see聽
that for the most part shares were pretty steady聽聽
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although there was some slight delusion until a聽
big uptick in delusion over the last year they've聽聽
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deluded shareholders by nearly a third so this聽
is going to be an x ultimately what this means is聽聽
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that when you're buying a stock what you're really聽
purchasing is an underlying ownership percentage聽聽
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of that business and so by issuing new shares and聽
diluting shareholders the business is ultimately聽聽
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robbing you of the ownership of that company and聽
you're owning progressively less and less of the聽聽
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business so if you had purchased this stock in聽
2020 you're now only entitled to about 60 of those聽聽
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profits that the business would have generated聽
that would have been coming your way if they had聽聽
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not deluded you so this can be a silent killer for聽
investors over the long term and that's an x on聽聽
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pillar number five pillar number six we're looking聽
for five year free cash flow growth free cash flow聽聽
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is cash from operations minus capital expenditures聽
it's this column here in green free cash flow can聽聽
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be used to pay dividends buy back shares pay down聽
debt make acquisitions and reinvest back in the聽聽
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business it's the lifeblood of any business and聽
a business's ability to produce free cash flow is聽聽
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ultimately what it should be valued based on so聽
eagle has had negative free cash flow in four聽聽
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of the last five years although last year in 2021聽
they had positive 74 million dollars of free cash聽聽
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flow so pillar number six is going to be a check聽
so even though this is a check in an average year聽聽
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eagle is burning about 65 million dollars of cash聽
and one thing to make note of is that over this聽聽
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most recent boom over the last 12 months eagle聽
has actually produced 151 million dollars of聽聽
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free cash flow so that's double what it produced聽
in all of 2021 what you really want to understand聽聽
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when you're evaluating this business is that the聽
shipping industry is extremely cyclical just by聽聽
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the nature of it it has these crazy boom and bust聽
cycles so there's a delay in adding new capacity聽聽
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and adding new supply to the shipping industry聽
which is part of the reason it has this boom and聽聽
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bust cycle so some major components to consider聽
when potentially investing in this business is聽聽
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to understand what that industry looks like and聽
where they currently are in that kind of cycle聽聽
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and then the other thing more business specific聽
is understanding what egos management is doing聽聽
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with all this extra cash flow that they haven't聽
had in years past are they just adding in a ton聽聽
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of more orders for new ships or are they using聽
this prudently to do things like pay down debt聽聽
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buy back shares you know reinvest in their聽
business in some other way so those are two聽聽
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absolutely critical factors that you need to聽
understand as an investor if you're thinking聽聽
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about investing into ego now let's continue with聽
our analysis pillar number seven we want their聽聽
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net debt which is long and short-term liabilities聽
minus cash and short-term equivalence to be below聽聽
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their average five-year free cash flow multiplied聽
by five so again they're burning free cash flow聽聽
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in a given year they have negative free cash聽
flow so pillar number seven is going to be an x聽聽
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however remember that they're trailing 12 months聽
of free cash flow is about 151 million dollars so聽聽
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they would only need two years of their past 12聽
months of free cash flows to pay off all of this聽聽
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debt so we really want to understand is this boom聽
that they're currently at sustainable you know is聽聽
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it just going to taper off or is it going to come聽
down with a very hard landing so again that goes聽聽
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back to the point of you got to understand both聽
the industry dynamics and the business dynamics聽聽
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and you really need to know this company inside聽
and out if you're thinking about investing in it聽聽
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so that's an x on pillar number seven finally聽
the big pillar of them all pillar number eight we聽聽
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want their market cap to be below their average聽
five-year free cash flow multiplied by five so聽聽
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currently they have a billion dollar market cap聽
again they're burning free cash flow so they have聽聽
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negative free cash flow so pillar number eight聽
is going to be an x if we compare their market聽聽
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cap to their trailing 12 months of free cash聽
flow currently they're trading at a seven times聽聽
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free cash flow yield again to rag on the same聽
point and to beat a dead horse you absolutely聽聽
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have to understand is this sustainable or not聽
going forward so lastly i want to analyze their聽聽
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dividend currently eagle bulk shipping pays out a聽
very high dividend yield of nearly eight percent聽聽
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which is well above most other stocks in the聽
market so to analyze their dividend really what聽聽
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we're looking for is a healthy and sustainable聽
dividend that's well supported by their cash flows聽聽
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so here we're looking at per share numbers and we聽
can see just like we found out in our cash flow聽聽
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analysis that in four out of the last five years聽
eagle has had negative free cash flow per share聽聽
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however in the most recent calendar year聽
they've had positive free cash flow per share聽聽
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they've had nearly six dollars of free cash flow聽
per share and they've paid out about four dollars聽聽
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in dividends so they're paying back about 66聽
of their cash flow out directly as dividends聽聽
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to their shareholders in the most recent trailing聽
12 months eagle has produced about 12 dollars of聽聽
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cash flow per share and they've slightly reduced聽
their payout ratio they're only paying about聽聽
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six dollars of dividends a share so now they're聽
holding on to more cash and they're paying out 50聽聽
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of their cash flows as dividends obviously this聽
is very good for investors who want them to be聽聽
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returning capital but if you're a longer term聽
investor in the business you're going to want聽聽
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to understand what that other 50 of their cash聽
flow is being used for and why the company isn't聽聽
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paying out similar to those 60 rates it's good聽
that they haven't paid dividends in the years that聽聽
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they haven't had cash flows and now that they have聽
this really huge boom in cash flow it's nice that聽聽
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they're returning cash to their shareholders so in聽
summary eagle bulk shipping checks the box on four聽聽
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out of eight pillars with a business like this you聽
have to be careful they went from losing a lot of聽聽
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money with a very low return on capital to making聽
a huge amount of free cash flow with a really high聽聽
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return on capital in just the last year and a lot聽
of that has to do with the global shipping boom聽聽
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that we've seen the prices of moving shipping聽
containers has absolutely gone through the roof聽聽
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and so there is the potential that they're聽
generating a lot of free cash flow it hasn't聽聽
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been sustainable for them in the past there's聽
that potential that it could be going forward聽聽
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in the future but to really understand that you聽
have to be an expert especially in the global聽聽
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shipping industry and then you have to absolutely聽
understand how this business is allocating capital聽聽
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now and into the future to consider investing in聽
ego bulk shipping so this type of analysis is just聽聽
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a starting point to do your homework and to learn聽
more about the company in more depth i highly聽聽
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recommend checking out the businesses filings and聽
getting a more general more nuanced understanding聽聽
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of the shipping industry in general you gotta聽
understand a business inside and out just like聽聽
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you actually own the business to really consider聽
investing into it anything other than that is聽聽
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just really speculation well guys that's it for聽
today's stock analysis of eagle bulk shipping inc聽聽
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ticker symbol egle if you enjoyed the video聽
please be sure to like the video subscribe to聽聽
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the channel for more stock analysis videos and聽
comment down below what business you want me聽聽
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to take a look at next thanks for learning about聽
eagle bulk shipping with me and have a great day
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