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Buy Global Ship Lease On Understated 2Q EPS Forecasts

Aug. 03, 2021 1:14 PM ETGlobal Ship Lease, Inc. (GSL) Stock31 Comments


  • It seems the street underestimates GSL's EPS figures for 2Q 2021. After the last revision, the EPS consensus is 12% lower than a few months later.
  • At the same time, HARPEX, which affects the company's EPS, is 48.84% higher than in 1Q 2021 and 2.68x higher than in 2Q 2020. Mispricing seems to be obvious.
  • Historically, after EPS surprises, the stock price skyrockets during the next quarter.
  • At the end of the article, I offer suggestions for how you can get involved in this idea.

Вид с воздуха на грузовое судно в пути.
bfk92/E+ via Getty Images

Investment thesis

As of March 10, 2021, Global Ship Lease (NYSE:GSL) owned and chartered 43 mid-sized and smaller containerships, making astronomical profits amid vessels shortage and sky-high charter rates. However, for some unknown reason, analysts underestimate

This article was written by

Oakoff Investments profile picture

Oakoff Investments is a personal portfolio manager and a quantitative research analyst with 5 years helping readers find a reasonable balance between growth and value by sharing proprietary Wall Street information.

He leads the investing group Beyond the Wall Investing with features that include: a fundamentals-based portfolio, weekly analysis on insights from institutional investors, regular alerts for short-term trade ideas based on technical signals, ticker feedback by request from readers, and community chat. Learn more.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Long position through a purchase of the stock, or the purchase of call options or similar derivatives in GSL over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (31)

I bought GSL a year or so ago. $13.70/share. I'm confused about two things. SA says they have 7 employees?? competitors have hundreds? Also, my brokerage puts the divvy at $1 per year. But there's no history. Is a divvy a new thing for them? Thanks in advance, if anyone sees this and wants to help.
shourey profile picture
@Charliedon'tsurf Regarding dividend, yes they pay quarterly dividend of 0.25 cents , annualized to 1$. They may have started from last Qtr.

J Mintzmyer profile picture
@Charliedon'tsurf ,

They relaunched their dividend earlier this year, only one payment so far- with the second payment coming very soon. So yes, the dividend is indeed $1/yr.

They outsource vessel management, etc, so that's why the employee count is so small. Basically just senior management there. Not sure if 7 is correct, but its indeed a small number at the direct company level.
@J Mintzmyer Any news on big dip today? I can't find anything
Thanks for the article. I own several shipping stocks and looked at GSL and i do not see what the advantage of GSL is compared to peers, for example DAC. Both trade at a similar discount to NAV while DAC has lower operating cost, lower debt interest, lower leverage and more ships coming off charter next year. Also the 5.5k TEU ships bought by DAC look of higher quality and bought at a more attractive price compared to the GSL's ships. Am I missing something? I would love to hear where GSL beats peers
So roughly speaking, based on page 8 of the presentation, ( taking average of scenerio 1 and 2 ), the adjusted EBITDA for 2021 is about 4$-6/share and for 2022 in 9-11$/share Range.


Isn't that outstanding!!! Time to load of the ship and set sail
@Shourey01 ok risk reward I would say 😀
This is a bad deal. Dont. Writer logic fuzzy.

Ok ok...DONT BUY THIS COMPANY cause your going to run up my costs of loading up. Lol.

btw...nice earnings call today.
vantuckman profile picture
@cpr1200r100: I share your fear. RUN!! Kirk
shourey profile picture
@oakoff investments, great job. As you stated, the earnings per share were higher than expected and higher by a big margin ( 50-56c/share Vs 83c/share actual ). Thank you for your timely analysis. What now ? Will the 3rd Qtr be flat or show a sequential EPS increase as per your model ?
hammerinvesting profile picture
Yup. I stand corrected. Pretty solid beat although 20% or so was due to one-off vessel sales.
hammerinvesting profile picture
@shourey Q3 and Q4 will undoubtedly be higher than Q2. There are some vessels up for renewals and if you look at the enormous rate increase for a vessel like the Eleftheria (page 7 in the presentation) going from $12K/day to $38K/day until Q1 of 2025 it seems pretty obvious the coming quarters will be even better than this one.
Oakoff Investments profile picture
@shourey Thanks for the comment. I agree with @hammerinvesting here
shourey profile picture
Its show time for GSL tomorrow. The guidance forward may be even more important.
Nice article, thanks! Strange days so not confident the stock will rise (short term) even with EPS above expectation.
1. DAC actual eps is $3.34 not $3.4. Don't go by SA numbers, they are quite often wrong - unfortunately.

2. If you look at some other sources, like Yahoo, there is NO reducing of estimates for GSL over the last 3 months. They have steadily GONE UP from $0.52 to $0.56. Again, basing your investment thesis on one source is hazardous.


3. Harpex reports spot market rates. GSL contracts out their ships for long term, so the immediate effect of Harpex on quarterly revenue will be barely significant. The higher spot rates means new ship contracts will be written at higher rates but those represent a very small percentage of the ships and any effect on the revenue on the short term would be small.

4. There is no telling what the market will do if there is a beating of the estimates by GSL, judging from the other companies in the sector. You can have a beat and the stock might still go down. Making buying decisions for a short term trade probably will disappoint.
Jowaniter profile picture
Thanks for the article.
The 7 Maersk vessels are 20 y old, so depending on what scrap value GSL has taken for these vessels, the depreciation can be rather high for these vessels.
(i.e. the NET contribution to EPS will be lower - i count on $0.52/share)
There are also 2 DD's that may take longer than usual (Athena & New Yorker)
Long GSL
shourey profile picture
Thanks for explaining your logic behin investing in GSL.
hammerinvesting profile picture
Rather than to focus on whether they beat or miss by a few cents this coming quarter it seems to me it makes more sense to view this one with a longer lense as they have locked in very solid earnings for at least the coming 2-3 years that will make the coming Q look almost insignificant. Even the coming Q3 and Q4 will more than double Q2 earnings so a slight beat or miss on Aug 5th can't be all that significant imo.
vantuckman profile picture
@hammerinvesting: Thanks for the very perceptive comment. Earnings seldom conform to an orderly quarterly schedule. The key is where the earnings are going. The future earnings will evolve, and the "analysts" will wake up to this extraordinary set of global shipping constraints. (Which will drive profits well past Q2). Long, Kirk
Thanks for the Article. I think Earnings will increase the next few years also.
I think the unknown cost that might be associated with the IMO requirements for lower emissions on shipping might be hurting the price a bit. Still have not figured out how this could be enforced on a worldwide basis.
rowenco profile picture
It's always possible the company may decide to pay for the recently purchased ships with a secondary offering. I'm not sure now, but I think they did this a few months back, and the stock took a pretty big hit.
J Mintzmyer profile picture
I completely agree that GSL is wildly undervalued. Thanks for the update.
Damon Judd profile picture
Long GSL and added more on the drop this morning. Also long BGFV and added more yesterday.
to be "safe" just sell the sept $17.50 puts and get paid $2(a few minutes ago).
you either own this at $15.50(net cost) or you make $2 on a $15.50 investment for
1 1/2 months(almost 13%).
Nice already loaded
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