Shipper Tsakos Looks Cheap

Aug. 2.07 | About: Tsakos Energy (TNP)

The shipping party is getting a little long in the tooth, but it seems there is still some fun to be had there. Virtually every shipping company has been benefiting from increased global economic activity and rising tanker rates. One oil tanker company that has taken advantage of the favorable economics in the industry and is strategically well positioned is Tsakos Energy Navigation Ltd. (NYSE:TNP).

In an environment where tankers are in short supply, Tsakos has managed to build a modern fleet with several new ships being delivered in coming years. This has also allowed the company to realize profits from sales of older ships. Such sales have already been announced for the second and third quarters of this year, adding $31 million to the bottom line each quarter.

Of course, earnings stemming from asset sales are not as desirable as normal operating earnings, but repeated sales of that kind would suggest that the management of Tsakos has a knack for buying and selling ships at a profit. It also supports the statement made in their last annual report that the resale value of its existing fleet and the value of ships being built exceeds the book value by $850 million, not an insignificant number for a company with a market capitalization of $1.35 billion.

Looking at standard valuation metrics, Tsakos still looks cheap. With an ROE over 20% in each of the last four years, a market capitalization lower than management’s assessment of the company’s real equity, and a dividend yield of 4.1%, there is still plenty of upside in this stock. Keep your eyes and ears open for Tsakos’ second quarter earnings release on Friday, August 3.

Disclosure: Author is long TNP