Nordic American Tankers (NAT) Valuation After Geopolitical Supply Tightness Lifts Suezmax Day Rates

Recent reports point to tighter tanker availability as Middle East tensions and the Russia Ukraine conflict disrupt crude flows, lifting Suezmax day rates and putting Nordic American Tankers (NAT) in focus for income oriented shipping investors.

See our latest analysis for Nordic American Tankers.

While the latest share price of $5.62 reflects a 34.13% 90 day share price return and a 66.77% year to date share price return, the 147.27% 1 year total shareholder return points to momentum that has built around tighter tanker supply and higher Suezmax rates.

If tightening shipping capacity has caught your attention, it may be worth widening the lens and checking out opportunities in 28 elite gold producer stocks as another way to consider commodity linked themes.

With Nordic American Tankers trading at $5.62 against an average analyst target of $6.00 and an indicated intrinsic premium, are you looking at a still underappreciated tanker income story or a stock where markets already price in future growth?

Preferred P/E of 97x: Is it justified?

On a P/E of 97x, Nordic American Tankers trades at a level that points to a rich earnings multiple at the current share price of $5.62.

The P/E ratio compares the share price to earnings per share and is a quick way of seeing how much investors are paying for each dollar of profit. For a tanker company, a high P/E can sometimes reflect expectations that current earnings sit below what forecast profits could look like if day rates or fleet utilization normalise at higher levels.

Here, the current 97x P/E stands well above the estimated fair P/E of 33.6x. This suggests the market valuation is far ahead of the level the SWS fair ratio model indicates the multiple could move toward. Versus the US Oil and Gas industry average P/E of 14.9x and a peer average of 13.8x, the gap is wide and points to Nordic American Tankers trading at a premium earnings multiple relative to sector and peer benchmarks.

Explore the SWS fair ratio for Nordic American Tankers

Result: Price-to-Earnings of 97x (OVERVALUED)

However, that premium P/E can quickly look stretched if Suezmax day rates soften, or if disruptions to crude flows ease and tanker availability improves.

Find out about the key risks to this Nordic American Tankers narrative.

Another way to look at value

Our DCF model points to an estimated future cash flow value of $3.69 per share, compared with the current $5.62 price. That flags Nordic American Tankers as overvalued on this method. This raises a simple question for you: do recent tanker day rates fully justify paying above the DCF output?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Nordic American Tankers for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 53 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

With the mixed signals around valuation and tanker market conditions, it makes sense to look at the full picture yourself and decide quickly where you stand, starting with its 1 key reward and 4 important warning signs.

Ready to line up your next investment ideas?

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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