Castor Maritime (NASDAQ:CTRM) stock is fairly alluring. The company is a shipping operator that is aggressively growing its fleet. There is a logical, if speculative, economic argument underpinning an investment in shipping stocks.
The company now has a fleet in excess of a dozen ships. CTRM stock is currently trading under $1 per share. Speculators have every reason to wonder if this is a potential jackpot.
I would caution investors who are seriously considering establishing a position in CTRM stock to simply dismiss the Reddit/WallStreetBets/Robinhood narratives. Whether Castor Maritime makes sense depends almost entirely upon the fundamentals behind the company, and the sector in which it operates.
Expanding Operations
Until recently, Castor Maritime exclusively operated dry bulk transport ships. However, the company recently expanded into tanker ships. So, the company now operates in the dry bulk shipping and liquid tank services.
Castor Maritime was incorporated in 2017. Since then the company has steadily expanded its fleet. It will boast 14 ships once all of its current acquisitions are delivered.
Therefore, Castor Maritime now has more capacity to seize what it believes to be an oncoming market opportunity.
Sector Opportunity
There is reason to believe that the dry bulk sector may be entering a supercycle. According to EuroDry (NASDAQ:EDRY) CEO Aristides Pitta, the sector has seen two decade-long super cycles in the periods from 2000 to 2010, and 2010 to 2020. The former period was one of strength. Pitta said however:
“In 2010-2020, it was an extraordinarily bad decade. I’m not saying it’s going to be like 2000-2010. But there’s a huge difference between those two extremes. If we can just hover around median levels, we will see good profitability for most companies.”
Castor Maritime may then be able to make significant headway if the sector reaches medium strength. 12 of Castor Maritime’s 14 ships operate in the dry bulk market. The company’s 2 Aframax tankers are double hulled oil tankers.
Clearly the company is looking to capitalize in the oil transport markets, as the 2 Aframax oil tankers are recent purchases. Let’s assume, however, that dry bulk is the driving force catalyzing CRTM stock.
Castor Maritime’s Operational Health
Castor Maritime did manage to substantially increase its revenues from 2019 to 2020. Through the first three quarters of each year, revenues rose from $3.125 million to $8.102 million. In 2019, the company managed to squeeze $560,801 of profit from those $3.125 million of revenues.
2020 was very different. Castor Maritime recorded a loss of nearly $985,000 on $8.102 million of revenue. Vessel operating expenses were higher on an absolute basis, but not much higher as a percentage of revenues.
Fleet utilization decreased from 99% to 89.6% during the period as well. It is difficult to pinpoint a single factor for why the company had a difficult year operationally. Of course the pandemic is to blame, but that doesn’t tell us much.
To be honest, results indicate a mixed bag. While losses increased in 2020, loss per common share became much closer to breakeven. There’s a reasonable argument that 2021 could be better.
It is difficult to extrapolate what will happen after the pandemic from Castor Maritime’s financial results.
CTRM Stock: The Takeaway
I wouldn’t jump into CTRM stock right now. There are signals that the company is in the right sector coming out of the pandemic, but there are likely much stronger dry bulk shipping stocks to pursue for exposure to that opportunity.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.