Since that time, EPS have grown to $1.73 for the twelve months ending June 30, 2015, but the price has fallen to $17.31, indicating a P/E ratio of 10.0. The stock has fallen as a result of concerns about the oil production industry as well as concerns about how rising interest rates might impede the company’s progress. In our view, both are overblown.
Navigator Holdings reported second quarter results for the period ending June 30, 2015, with better figures than expected by analysts on the Street. Total revenues were $84.1 million, up 10.6% from $76.1 in the year ago quarter. EPS grew 33.3% to $0.47, from $0.35 in 2Q14. The company noted increased average charter rates and an increased fleet size that boosted results, aided by decreased average daily operating expenses across the fleet.
The utilization rate across the 28 vessels operated by Navigator Holdings during the second quarter was a record 97.7%, reflecting consistent strong demand for their handysize vessels in the transportation of LPG and petrochemicals. The company has been successful in balancing its business between long-term charters and spot deliveries, and expects to be able to do so in the future. This balanced approach delivers an optimal level of long-term stability with the ability to respond to short-term needs that could generate higher revenues.
The company continues with its expansion and fleet improvement plans, selling one ship in the quarter at a favorable price. Two new similar ships will arrive online in the coming months to replace the sold vessel. These new ships are more eco-friendly and economical to operate. A total of 10 semi-refrigerated gas carriers newbuildings are on order, for delivery between August 2015 and March 2017. This will bring Navigator’s fleet to 37 vessels.
The company’s debt is in fine shape, with banks regularly approaching the company to offer loans and very good rates. Navigator’s CFO projects their cost of capital based on current LIBOR to be about 2.5%. The company has $91 million in cash on a pro forma basis following the recent ship sale. Until construction is complete on the ships current being built, that capital investment will remain as an expense, but once the ships are in the water they will quickly start generating a return on investment.
Over the next five years, we currently see the possibility of growth of revenues of as much as 12%. With margin expansion generated by the additional capacity of a more economical fleet and growing fleet utilization, we see 12% EPS growth as a very conservative estimate. Note that revenues grew 31.5% in 2014 over 2013, while EPS grew 65.2% for the same fiscal year. Based on a future high P/E of 15 and a future low P/E of 9.5, the range of future prices stretches from $16.40 to $45.80.