With the business potentially at an important milestone, we thought we'd take a closer look at Genco Shipping & Trading Limited's (NYSE:GNK) future prospects. Genco Shipping & Trading Limited, together with its subsidiaries, engages in the ocean transportation of dry bulk cargoes worldwide. With the latest financial year loss of US$226m and a trailing-twelve-month loss of US$53m, the US$856m market-cap company alleviated its loss by moving closer towards its target of breakeven. Many investors are wondering about the rate at which Genco Shipping & Trading will turn a profit, with the big question being “when will the company breakeven?” In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.
Consensus from 5 of the American Shipping analysts is that Genco Shipping & Trading is on the verge of breakeven. They expect the company to post a final loss in 2020, before turning a profit of US$134m in 2021. The company is therefore projected to breakeven around 12 months from now or less. At what rate will the company have to grow in order to realise the consensus estimates forecasting breakeven in under 12 months? Using a line of best fit, we calculated an average annual growth rate of 30%, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.
Underlying developments driving Genco Shipping & Trading's growth isn’t the focus of this broad overview, but, bear in mind that typically a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.
One thing we would like to bring into light with Genco Shipping & Trading is its relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in Genco Shipping & Trading's case is 46%. Note that a higher debt obligation increases the risk in investing in the loss-making company.
This article is not intended to be a comprehensive analysis on Genco Shipping & Trading, so if you are interested in understanding the company at a deeper level, take a look at Genco Shipping & Trading's company page on Simply Wall St. We've also put together a list of important aspects you should look at:
- Valuation: What is Genco Shipping & Trading worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether Genco Shipping & Trading is currently mispriced by the market.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Genco Shipping & Trading’s board and the CEO’s background.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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