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The ZIM stock is trading at a discount with a forward 12-month P/S of 0.45X compared with the industry’s 2.24X.
Image Source: Zacks Investment Research
ZIM is cheaper in valuation than fellow industry players Seanergy Maritime Holdings (SHIP - Free Report) and Euroseas Limited (ESEA - Free Report) , which is attractive to investors.
Now, the question is whether it is worth buying at current prices. Let us dig deeper to find out.
Red Sea Crisis: A Huge Boon for ZIM
Heightened freight rates due to the Red Sea Shipping crisis are turning out to be a huge positive for ZIM. The crisis caused by the attacks by Yemen’s Houthi militants on vessels in the Red Sea has prompted many shipping companies, including ZIM, to hit pause as far as transit through this route is concerned. They are using the longer and costlier route around the Cape of Good Hope in South Africa rather than going through the Suez Canal. Reduced container availability due to the Red Sea tensions has resulted in higher freight costs.
As a result of the disruptions, ZIM’s profits, revenues and carried volumes for the first six months of 2024 have surged. The Israeli shipping company reported a 30% year-over-year uptick in revenues in the first half of 2024 to $3.49 billion. EBIT (earnings before interest and taxes) in the same period turned to a profit of $635 million from the loss of $182 million registered in the first half of 2023. Volumes have increased 10.4% over the past six months, with average freight rates rising 22% year over year.
In August, ZIM raised its guidance for 2024 adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). The shipping company expects the metric to be $1.45-$1.85 billion. Previously, ZIM anticipated generating adjusted EBITDA between $1.15 and $1.55 billion.
ZIM’s Price Performance Strong
Driven by the Red Sea crisis-induced tailwinds, ZIM shares have performed exceedingly well on the bourses, skyrocketing 146.6% year to date, handily outperforming its industry.
YTD Share Price Comparison
Image Source: Zacks Investment Research
Technical indicators suggest continued strong performance for ZIM. The stock trades above its 50-day and 200-day moving averages, signaling robust upward momentum and price stability. This technical strength underscores positive market sentiment and confidence in ZIM’s financial health and prospects.
Image Source: Zacks Investment Research
More Reasons to be Bullish on ZIM Stock
The shipping company’s asset-light model, which means that the focus is more on leasing rather than owning vessels, allows it to adjust capacity rapidly in response to market changes. This practice helps it boost profits during high demand.
ZIM’s focus on niche markets and high-margin trade routes helps it avoid crowded, low-margin segments, thereby maintaining strong pricing power. This, too, aids profitability. The shipping company’s operational efficiency is being aided by investments in digitalization and innovative technologies. This not only boosts ZIM’s bottom line but allows it to take advantage of emerging trends, such as the increased demand for eco-friendly shipping solutions.
Earnings Estimate Revision Favoring ZIM Stock
Reflecting the positive sentiment around ZIM, the Zacks Consensus Estimate for earnings per share for the third and fourth quarters of 2024, as well as the full year, has seen upward revisions. The positive revision trend reflects confidence in ZIM’s ability to continue delivering strong financial performances.
Image Source: Zacks Investment Research
The company’s long-term (3-5 years) earnings growth rate is an impressive 47.4%, higher than its industry’s 23.3%.
Time to Buy the Undervalued ZIM Stock?
ZIMcontinues to benefit from upbeat global trade and container shipping demand. The Red Sea crisis represents a huge tailwind for the shipping company, as elaborated throughout this write-up. Like the first two quarters of the year, ZIM’s performance in the September-end quarter is likely to have been stellar, driven by buoyant freight rates and carried volume.
ZIM, which usually distributes 30% of net income to common shareholders, is likely to pay higher dividends in the third quarter than in the second quarter. ZIM’s shareholder-friendly approach throws light on its financial prosperity. The shipping company’s high dividend yield is a major positive for income-seeking investors. This highlights ZIM’s confidence in its cash flow and prospects.
Given the positives surrounding the ZIM stock, it presents a compelling investment opportunity now. This Zacks Rank #1 (Strong Buy) undervalued stock is an ideal candidate for investors' portfolio addition. You can see the complete list of today’s Zacks #1 Rank stocks here. .
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Is ZIM's Cheap Valuation an Opportunity to Invest in the Stock?
ZIM Integrated Shipping Services Ltd. (ZIM - Free Report) shares are among the cheaper ones in the Zacks Transportation—Shipping industry, with a Value Score of A.
The ZIM stock is trading at a discount with a forward 12-month P/S of 0.45X compared with the industry’s 2.24X.
ZIM is cheaper in valuation than fellow industry players Seanergy Maritime Holdings (SHIP - Free Report) and Euroseas Limited (ESEA - Free Report) , which is attractive to investors.
Now, the question is whether it is worth buying at current prices. Let us dig deeper to find out.
Red Sea Crisis: A Huge Boon for ZIM
Heightened freight rates due to the Red Sea Shipping crisis are turning out to be a huge positive for ZIM. The crisis caused by the attacks by Yemen’s Houthi militants on vessels in the Red Sea has prompted many shipping companies, including ZIM, to hit pause as far as transit through this route is concerned. They are using the longer and costlier route around the Cape of Good Hope in South Africa rather than going through the Suez Canal. Reduced container availability due to the Red Sea tensions has resulted in higher freight costs.
As a result of the disruptions, ZIM’s profits, revenues and carried volumes for the first six months of 2024 have surged. The Israeli shipping company reported a 30% year-over-year uptick in revenues in the first half of 2024 to $3.49 billion. EBIT (earnings before interest and taxes) in the same period turned to a profit of $635 million from the loss of $182 million registered in the first half of 2023. Volumes have increased 10.4% over the past six months, with average freight rates rising 22% year over year.
In August, ZIM raised its guidance for 2024 adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). The shipping company expects the metric to be $1.45-$1.85 billion. Previously, ZIM anticipated generating adjusted EBITDA between $1.15 and $1.55 billion.
ZIM’s Price Performance Strong
Driven by the Red Sea crisis-induced tailwinds, ZIM shares have performed exceedingly well on the bourses, skyrocketing 146.6% year to date, handily outperforming its industry.
YTD Share Price Comparison
Technical indicators suggest continued strong performance for ZIM. The stock trades above its 50-day and 200-day moving averages, signaling robust upward momentum and price stability. This technical strength underscores positive market sentiment and confidence in ZIM’s financial health and prospects.
More Reasons to be Bullish on ZIM Stock
The shipping company’s asset-light model, which means that the focus is more on leasing rather than owning vessels, allows it to adjust capacity rapidly in response to market changes. This practice helps it boost profits during high demand.
ZIM’s focus on niche markets and high-margin trade routes helps it avoid crowded, low-margin segments, thereby maintaining strong pricing power. This, too, aids profitability. The shipping company’s operational efficiency is being aided by investments in digitalization and innovative technologies. This not only boosts ZIM’s bottom line but allows it to take advantage of emerging trends, such as the increased demand for eco-friendly shipping solutions.
Earnings Estimate Revision Favoring ZIM Stock
Reflecting the positive sentiment around ZIM, the Zacks Consensus Estimate for earnings per share for the third and fourth quarters of 2024, as well as the full year, has seen upward revisions. The positive revision trend reflects confidence in ZIM’s ability to continue delivering strong financial performances.
Image Source: Zacks Investment Research
The company’s long-term (3-5 years) earnings growth rate is an impressive 47.4%, higher than its industry’s 23.3%.
Time to Buy the Undervalued ZIM Stock?
ZIMcontinues to benefit from upbeat global trade and container shipping demand. The Red Sea crisis represents a huge tailwind for the shipping company, as elaborated throughout this write-up. Like the first two quarters of the year, ZIM’s performance in the September-end quarter is likely to have been stellar, driven by buoyant freight rates and carried volume.
ZIM, which usually distributes 30% of net income to common shareholders, is likely to pay higher dividends in the third quarter than in the second quarter. ZIM’s shareholder-friendly approach throws light on its financial prosperity. The shipping company’s high dividend yield is a major positive for income-seeking investors. This highlights ZIM’s confidence in its cash flow and prospects.
Given the positives surrounding the ZIM stock, it presents a compelling investment opportunity now. This Zacks Rank #1 (Strong Buy) undervalued stock is an ideal candidate for investors' portfolio addition. You can see the complete list of today’s Zacks #1 Rank stocks here. .