Ardmore Shipping Corporation (ASC) Soars to 52-Week High, Time to Cash Out?

·4-min read

Have you been paying attention to shares of Ardmore Shipping (ASC)? Shares have been on the move with the stock up 39% over the past month. The stock hit a new 52-week high of $18.99 in the previous session. Ardmore Shipping has gained 31.4% since the start of the year compared to the 9.9% move for the Zacks Transportation sector and the 14.4% return for the Zacks Transportation - Shipping industry.

What's Driving the Outperformance?

The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on February 14, 2023, Ardmore Shipping reported EPS of $1.3 versus consensus estimate of $1.28 while it beat the consensus revenue estimate by 11.18%.

For the current fiscal year, Ardmore Shipping is expected to post earnings of $2.46 per share on $236.85 million in revenues. This represents a -34.22% change in EPS on a -18.89% change in revenues. For the next fiscal year, the company is expected to earn $1.17 per share on $178.73 million in revenues. This represents a year-over-year change of -52.24% and -24.54%, respectively.

Valuation Metrics

Ardmore Shipping may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.

On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.

Ardmore Shipping has a Value Score of C. The stock's Growth and Momentum Scores are A and C, respectively, giving the company a VGM Score of B.

In terms of its value breakdown, the stock currently trades at 7.7X current fiscal year EPS estimates, which is a premium to the peer industry average of 6.7X. On a trailing cash flow basis, the stock currently trades at 4.1X versus its peer group's average of 2.8X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Ardmore Shipping currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Ardmore Shipping passes the test. Thus, it seems as though Ardmore Shipping shares could still be poised for more gains ahead.

How Does ASC Stack Up to the Competition?

Shares of ASC have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Danaos Corporation (DAC). DAC has a Zacks Rank of # 2 (Buy) and a Value Score of A, a Growth Score of A, and a Momentum Score of A.

Earnings were strong last quarter. Danaos Corporation beat our consensus estimate by 1.30%, and for the current fiscal year, DAC is expected to post earnings of $26.02 per share on revenue of $869.3 million.

Shares of Danaos Corporation have gained 1.5% over the past month, and currently trade at a forward P/E of 2.21X and a P/CF of 2.47X.

The Transportation - Shipping industry may rank in the bottom 80% of all the industries we have in our universe, but there still looks like there are some nice tailwinds for ASC and DAC, even beyond their own solid fundamental situation.

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