Euroseas Limited ESEA continues to benefit from upbeat global trade and container shipping demand. ESEA shares have performed well on the bourses, gaining 49.7% year to date, handily outperforming its industry and other industry players like Seanergy Maritime Holdings SHIP and Frontline Plc FRO.

YTD Share Price Comparison

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Technical indicators suggest continued strong performance for ESEA. The stock trades above its 50-day moving average, signaling robust upward momentum and price stability. This technical strength underscores positive market sentiment and confidence in ESEA’s financial health and prospects.

50-Day Moving Average of ESEA Stock

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In view of the northward movement of ESEA stock, investors must be wondering if they should lock in profits or buy the stock for more upside potential.

Let’s delve into the company’s fundamentals to determine the best course of action.

Red Sea Crisis Pushes Ocean Freight Rates Up: A Tailwind for ESEA

Euroseas is an owner and operator of container carrier vessels and a provider of seaborne transportation for containerized cargoes. The company has been benefiting from profitable contracts and maintains a time charter equivalent rate or TCE of more than $30,000 per day.

The Houthi militants' attacks on vessels passing through the southern Red Sea have crippled trade through the Suez Canal, driving many container shipping companies like ESEA to add 10-14 days to the voyages between Asia and Europe. The current Red Sea crisis has prompted the usage of more vessels. As a result, the crisis is causing a shortage of shipping containers.

Reduced container availability due to the Red Sea tensions has resulted in a rise in freight costs. Lower capacity has boosted earnings. Rates are likely to remain high for quite some time, which may translate into further upside potential for shipping stocks like ESEA.

Strong Q2 Results of ESEA

Last month, ESEA reported better-than-expected earnings per share and revenues for the second quarter of 2024. Revenues increased 26.4% year over year, driven by the increased time charter rates earned by the company’s vessels. The increase in the average number of vessels owned and operated in the second quarter of 2024 also resulted in an uptick.

In the June quarter, daily vessel operating expenses, including management fees but excluding drydocking costs, averaged $6,612 per vessel per day, down 7.1% year over year due to lower daily operating costs of the six new building vessels delivered within the past 14 months. This reduction aided the bottom line in the second quarter.

Additionally, the board declared a quarterly dividend of 60 cents per share ($2.40 annualized). ESEA’s shareholder-friendly approach throws light on its financial prosperity. The shipping company’s high dividend yield is a huge positive for income-seeking investors. This highlights confidence in its cash flow and prospects.  (Check Euroseas’ dividend history here).

The company is also active on the buyback front. While releasing second-quarter results, the company stated that as of Aug. 6, 2024, 400,705 shares of common stock were bought back by it for $8.2 million since the initiation of the share repurchase plan of up to $20 million, which was announced in May 2022. The company’s focus on returning value to customers through share buybacks and dividends is highly commendable and should stand it in good stead going forward.

ESEA Trades at a Discount Compared to Industry

From a valuation standpoint, ESEA stock is currently trading at a price-to-book of 1.02X, which is below the industry’s 2.98X. The reading is also near its 3-year median level. The stock, having a Value Score of A, seems to be undervalued now.

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Earnings Estimate Revisions Favoring ESEA Stock

Reflecting the positive sentiment around ESEA, the Zacks Consensus Estimate for earnings per share has seen upward revisions, as shown below.

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Final Verdict 

Given the positives surrounding the ESEA stock, as highlighted throughout the write-up, we believe that it’s not too late for investors looking to add ESEA stock to their portfolios for healthy returns. They can still invest in the stock, considering that it currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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Frontline PLC (FRO) : Free Stock Analysis Report

Euroseas Ltd. (ESEA) : Free Stock Analysis Report

Seanergy Maritime Holdings Corp (SHIP) : Free Stock Analysis Report

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