Navios Maritime: The 1x P/E the Market Refused to Pay

Navios Maritime: Earned $19 Per Share and Fell 8%

There is a shipping company that, in the first nine months of 2021, earned $19 per unit, traded at less than twice its earnings, and plummeted nearly 8% the day it released those accounts. It's called Navios Maritime Partners (NMM), it's listed in New York, and since the beginning of 2021, it has been the subject of one of the longest and most stubborn analyses by Spanish retail investors. The initial thesis could fit on a single page: scarcity of ships, soaring freight rates, and two years of fat profits. Five years later, with the stock at all-time highs, it's time to see who was right and at what price.

Because the problem was never the business. The problem was whose business it was, what its owner was called, and what that owner did with the money the ships generated.

Why Ship Scarcity Was Expected

The starting argument was textbook: after a decade of purging the excess fleet built during the 2008 bubble — when the Baltic Dry Index reached 11,000 points — the sector proge up to saturated shipyards and deliveries committed until mid-2023. With Asian demand at full throttle and post-pandemic stimulus boosting consumption, the conclusion seemed obvious: whoever had ships available would fill their pockets during that two-year window.

The company is not just about container ships. The majority of its fleet is dry bulk — coal, grain, iron ore — and a portion of tankers. That detail matters because, as argued, the imbalance in dry bulk was even more brutal than in containers. The BDI surpassed 3,000 points, and capesize vessel freight rates reached around $33,000 per day, with panamax rates hitting seasonal highs in mid-summer.

The technical nuance that fueled the conversation was FFAs, or freight futures contracts. When those future prices took off, the stock trinc. When they cooled down, the stock did too. With the benchmark index above 3,000 points, several participants calculated that the entire sector — Danaos, ZIM, Global Ship Lease, Diana Shipping — was trading at 90% to 120% of its asset value, while NMM was going its own way below 40%.

The Numbers That Didn't Add Up: A P/E Below 2

Forecasts for 2021 pointed to a profit of between $9 and $11 per share. At a stock price of $16, this placed the company at a P/E of less than 2. For 2022, estimates didn't decrease. An asset that generates cash like this should soar in the stock market.

It didn't soar. The market assigned it a market capitalization of around $500 million while the rest of the sector was at its highs. The price discounted more than skepticism: it discounted antiestéticar. And there was the first clue that the problem wasn't the freight rates, but who managed the cash and how it was spent.

A calculation that was repeated in the thread: if the company earned $9 per share and traded at $17, the profit yield on the price exceeded 50% annually. No institutional fund came near. The shared diagnosis was that the sector was demonized and that, until it showed strength in its accounts, big money would never enter.

The Asterisk: 899 Million Shares and a Bankrupt Parent Company

The sharpest warning came early. NMM ended 2020 with 6 ships and 132 million shares and, in a few months, embarked on a frenzied purchase of vessels with deliveries staggered until 2023. The final figure is staggering: an issuance in March of 192,307,700 shares at $0.65, plus as many warrants[/I] exchangeable at the same price for five years. In total, around 899 million shares outstanding, to which warrants must be added. A textbook dilution.

The aggravating factor is the structure. NMM is a master limited partnership: decisions are not made by its board, but by the parent company, Navios Maritime Holdings, a company that had been flirting with bankruptcy for years. At the helm of the structure is Angeliki Frangou, an executive with a declared obsession for accumulating ships and with minority shareholders last in line.

Hence the comparison circulating: buying NMM at 0.3 times its book value when competitors were trading at 0.8 or 1.0 was not a bargain, it was the price the market was willing to pay for corporate governance that had given ample reason for distrust. The most dangerous in the sector, concluded the most critical analysis.

The Dividend That Never Reaches the Shareholder

The sector was coming off the biggest dividend drought in memory. The criticism was repeated: money was made on paper here, not in the current account. While container companies signed one, two, and three-year contracts, NMM accumulated cash without distributing it. The result was a discount of 60% or 70% compared to its peers: it was literally trading at scrap metal prices with the market in an uproar.

This divorce between fundamentals and price is what kept interest alive for years. Some saw it as a historic opportunity; others, as the fair price for a company managed with other people's money. In between lay an uncomfortable truth: investors demand visibility on when they will get paid, and the entire sector offered few answers there.

The Merger That Changed Everything

In July 2021, NMM absorbed Navios Acquisition. The operation aligned management with shareholders — Frangou exchanged debt from her private vehicle for group shares and increased her stake — but it boosted indebtedness from 27% to 45% of book equity. The fund MRMP-Managers crossed the 5% threshold and sent a letter to management denouncing the management, a sign that it wasn't just retail investors looking with suspicion.

After the merger, the most optimistic calculations placed the net asset value at around $72 per unit, with around $300 million in cash at year-end. The market looked at that figure, then at the $25 price, and still didn't believe it.

There was a bitter interpretation that settled among veterans: the parent company had been nearing bankruptcy for a long time, and the merger, more than an industrial operation, was a rescue. Management had been containing NMM's debt for years precisely to make this move possible.

Excellent Results, Stock Market Punishment

The third quarter of 2021 was the test. NMM reported an adjusted profit of $4.77 per share — $5.97 unadjusted — with extraordinary items including $30.9 million from the sale of three vessels. In nine months, the group had accumulated almost $19 per unit. Excellence in containers, discreet in tankers, pending in dry bulk.

The stock fell 7% that day and another 8% afterwards, to around $22. The market's message was clear: if it doesn't go up with these numbers, it won't go up anytime soon. Veterans warned that the stock price moved to the rhythm of dry bulk futures, not quarterly results, and that the good container contracts were already priced in.

It was the moment of greatest demoralization. One declared his Stockholm Syndrome with management, another joked about infiltrating an analyst into the executive team to force a breakout. The majority held on for a simple reason: at those prices, selling hurt more than holding.

The Supercycle That Turned into a Mess

With 2022, the euphoria deflated. Between the Delta variant, the threat of interest rate hikes, and the permanent suspicion that management was waiting to buy the struggling parent company, the stock got bogged down between $22 and $24. The risk was no longer losing money — at those prices, they said, it was almost impossible — but the opportunity cost: watching competitors distribute millionaire dividends while here, other people's cash accumulated.

The cyclical sector is a curse that goes in both directions. Those who bought at the top learned how hard it is to hold on for a flat year while the neighbor gets rich without breaking a sweat.

Five Years Later

The outcome, to say the least, proved the patient ones right. The company bought 36 ships from its parent to rescue it from bankruptcy, and the stock price eventually hit all-time highs. In the final stretch, some declared gains of 195% since the original recommendation; others, more conservative, of 65%. The target price of $150 or $200 launched in 2021 sounded like a joke then and today is less distant than it seemed.

The official narrative will say the supercycle arrived. The nuance is that it arrived after years of dilution, opaque mergers, and management that treated the small investor as a necessary evil. The question that closes the matter is not whether the stock went up — it did — but how much of that return truly reached the pocket of the one who held on through thick and thin: how much got left behind, in cash, in new ships, and in decisions that no one voted for?