Nordic American Tankers (NAT) is back in focus after management highlighted a robust charter market, with its oil tankers securing contracts at historically high rates and lower crude prices supporting demand for transportation.
Recent trading has been choppy for Nordic American Tankers, with the share price down 11.64% over the past 30 days and 4.49% over the last week, even as a 90-day share price return of 21.37% and a year-to-date share price gain of 120.77% point to strong upward momentum overall. Against that backdrop, a 1-year total shareholder return of 144.62% and a 5-year total shareholder return of roughly 4.4x suggest investors have already priced in a lot of the robust charter market story. As a result, each new contract update can quickly shift perceptions around future cash flows and risk.
Scan other tanker and energy transport players that show a similar setup to Nordic American Tankers by reviewing our curated shortlist of list of solid balance sheet and fundamentals (23 results).
Nordic American Tankers looks like a solid operator in an unusually strong charter market, yet the share price has already sprinted ahead over the past year. Are investors now paying a fair price for that strength, or stretching it?
Price-to-Earnings of 12.8x: Is it justified?
The market is paying a P/E of 12.8x for Nordic American Tankers at a last close of $7.44, which sits below the broader US market but slightly above the US Oil and Gas sector average. That mix of signals raises the question of whether investors are giving the tanker operator too much credit for recent strength or still applying a discount.
The P/E ratio compares the share price with earnings per share and effectively shows how many dollars investors are willing to pay for each dollar of profit. For a shipping player like Nordic American Tankers, which operates a fleet of 20 Suezmax crude oil tankers, this gauge is often used as a shorthand for how sustainable the current earnings power is through the cycle.
On one hand, Nordic American Tankers screens as "good value" compared with the US market, where the average P/E sits at 18x. On the other hand, the stock is described as expensive when stacked against an estimated fair P/E of 8.8x, a level the market could move toward if expectations around earnings and tanker day rates reset. That tension is alongside forecasts that call for both revenue and profit to decline over the next three years, which suggests the current earnings base includes very large recent growth and one off gains that may not repeat.
Compared with closer peers, the picture is more finely balanced. The business trades at 12.8x earnings versus a US Oil and Gas industry average of 12.6x, which is only a slight premium. Given that analysts expect revenue to decline by about 12.9% per year and earnings to fall by around 12.3% per year over the coming three years, that small mark up implies investors are still placing a fairly full value on Nordic American Tankers despite forecasts of shrinking profits.
Explore the SWS fair ratio for Nordic American Tankers.
Result: Price-to-Earnings of 12.8x (OVERVALUED)
Still, the annual declines in revenue and net income growth, along with forecasts for falling earnings, could quickly challenge the current premium on Nordic American Tankers.
Find out about the key risks to this Nordic American Tankers narrative.
Another view on Nordic American Tankers valuation
On a discounted cash flow basis, our DCF model points the other way. At a last close of $7.44, Nordic American Tankers trades above an estimated future cash flow value of $6.77. This frames the stock as overvalued on this lens and raises the question of how much optimism is already embedded.
Look into how the SWS DCF model arrives at its fair value.
Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Nordic American Tankers for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 35 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.
Next Steps
Mixed signals around Nordic American Tankers valuation and earnings expectations can feel messy, so look through the forecasts, cash flow work and risk flags yourself, then weigh those 2 key rewards against the 4 important warning signs highlighted in our 2 key rewards and 4 important warning signs
Looking for more Nordic American Tankers style ideas?
If Nordic American Tankers has sharpened your focus on pricing, risk and income, it makes sense to widen your watchlist with a few targeted screeners.
- Target resilient balance sheets and steadier financial profiles by scanning our 30 resilient stocks with low risk scores before the next bout of volatility catches you off guard.
- Hunt for quality at a sensible price by running a fresh pass through the 35 high quality undervalued stocks so potential mispricings do not slip past you.
- Stack potential income ideas alongside NAT by reviewing the 4 dividend fortresses and see which payouts actually look built to last.
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