- By GF Value
The stock of Navios Maritime Acquisition (NYSE:NNA, 30-year Financials) is estimated to be possible value trap, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $3.925 per share and the market cap of $67.1 million, Navios Maritime Acquisition stock is estimated to be possible value trap. GF Value for Navios Maritime Acquisition is shown in the chart below.
The reason we think that Navios Maritime Acquisition stock might be a value trap is because Navios Maritime Acquisition has an Altman Z-score of 0.40, which indicates that the financial condition of the company is in the distressed zone and implies a higher risk of bankruptcy. An Altman Z-score of above 2.99 would be better, indicating safe financial conditions. To learn more about how the Z-score measures the financial risk of the company, please go here.
It is always important to check the financial strength of a company before buying its stock. Investing in companies with poor financial strength have a higher risk of permanent loss. Looking at the cash-to-debt ratio and interest coverage is a great way to understand the financial strength of a company. Navios Maritime Acquisition has a cash-to-debt ratio of 0.05, which is worse than 84% of the companies in Oil & Gas industry. The overall financial strength of Navios Maritime Acquisition is 3 out of 10, which indicates that the financial strength of Navios Maritime Acquisition is poor. This is the debt and cash of Navios Maritime Acquisition over the past years:
It is less risky to invest in profitable companies, especially those with consistent profitability over long term. A company with high profit margins is usually a safer investment than those with low profit margins. Navios Maritime Acquisition has been profitable 3 over the past 10 years. Over the past twelve months, the company had a revenue of $374.3 million and earnings of $2.81 a share. Its operating margin is 35.74%, which ranks better than 91% of the companies in Oil & Gas industry. Overall, the profitability of Navios Maritime Acquisition is ranked 5 out of 10, which indicates fair profitability. This is the revenue and net income of Navios Maritime Acquisition over the past years:
Growth is probably the most important factor in the valuation of a company. GuruFocus research has found that growth is closely correlated with the long term stock performance of a company. A faster growing company creates more value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth of Navios Maritime Acquisition is -11.1%, which ranks worse than 69% of the companies in Oil & Gas industry. The 3-year average EBITDA growth rate is -29.7%, which ranks worse than 81% of the companies in Oil & Gas industry.
Another method of determining the profitability of a company is to compare its return on invested capital to the weighted average cost of capital. Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, Navios Maritime Acquisition's return on invested capital is 8.58, and its cost of capital is 8.07. The historical ROIC vs WACC comparison of Navios Maritime Acquisition is shown below:
In conclusion, Navios Maritime Acquisition (NYSE:NNA, 30-year Financials) stock is believed to be possible value trap. The company's financial condition is poor and its profitability is fair. Its growth ranks worse than 81% of the companies in Oil & Gas industry. To learn more about Navios Maritime Acquisition stock, you can check out its 30-year Financials here.
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This article first appeared on GuruFocus.