Golden Ocean Group Limited (GOGL), a shipping company, recently disclosed its financial results for the fiscal third quarter. As a key player in the industry, GOGL owns and operates a diverse fleet of dry bulk vessels, including Newcastlemax, Capesize, Panamax, and Ultramax vessels, actively participating in both spot and time charter markets.

The primary cargoes transported by GOGL's vessels encompass a diverse array of bulk commodities, including ores, coal, grains, and fertilizers.

Following a somewhat lackluster performance in the second quarter, GOGL unveiled its third-quarter results on November 21, 2023. Despite surpassing analyst expectations, the company experienced a year-over-year decline in total revenue and earnings for the third quarter.

Furthermore, the company witnessed a substantial 65.1% and 20.4% year-over-year decrease in revenue from time charter and voyage charter, respectively. Additionally, GOGL's long-term debt increased by 27.6%, reaching $1.31 billion compared to $1.03 billion as of December 31, 2022.

Moreover, the dynamics of institutional investment in GOGL have seen recent shifts. Institutional ownership now accounts for approximately 19.3% of GOGL shares. Out of the 180 institutional holders, 77 have opted to reduce their positions in the stock, and 23 holders have entirely liquidated their positions. This indicates a changing sentiment among institutional investors regarding their stake in GOGL.

Over the past nine months, the company’s shares have plunged 11.5% to close the last trading session at $8.81.

Here are the factors that could affect GOGL’s performance in the near term:

Weak Financials

For the fiscal third quarter that ended on September 30, 2023, GOGL’s total operating revenues plunged 21.4% from the prior-year quarter to $221.66 million, while the company’s net operating income declined 55.8% from the year-ago value to $44.89 million.

Furthermore, GOGL’s net income and EPS came in at $28.73 million and $0.14, down 72.5% and 73.1% year-over-year, respectively. Also, during the same period, GOGL’s cash and cash equivalents stood at $97.52 million, representing a decline of 27.6% compared to $134.78 million as of December 31, 2022.

Low Profitability

The stock’s trailing-12-month cash per share of $0.49 is 76.8% lower than the $2.10 industry average. Its trailing-12-month Return On Total Capital (ROTC) of 2.83% is 59% lower than the industry average of 6.90%. Furthermore, GOGL’s trailing-12-month asset turnover ratio of 0.25x is 68.9% lower than the 0.80x industry average.

Mixed Analyst Estimates

Street expects revenue for the fiscal fourth quarter ending December 2023 to increase 81.1% year-over-year to $326.58 million, while its EPS for the same period is expected to plunge 27.1% year-over-year to $0.23. In addition, the company’s EPS is projected to come in at a negative $0.01 for the quarter ending March 2024.

High Valuation

In terms of forward non-GAAP P/E, GOGL is trading at 20.39x, 17.8% higher than the industry average of 17.30x. Likewise, its forward EV/Sales multiple of 5.09 is 199.4% higher than the industry average of 1.70. Furthermore, its forward Price/Sales multiple of 2.79 is 111% higher than the industry average of 1.32.

POWR Ratings Exhibit Bleak Prospects

GOGL’s weak fundamentals are reflected in its POWR Ratings. The stock has an overall rating of D, translating to a Sell in our proprietary rating system. The POWR Ratings are calculated by accounting for 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. GOGL has a D grade for Value and Quality justified by its higher-than-industry valuation and low profitability.

Moreover, the stock has a C grade for Sentiment in sync with the mixed analyst estimates stated above.

Within the Shipping industry, GOGL is ranked last out of the 43 stocks.

Beyond what we’ve stated above, we have also rated the stock for Growth, Momentum, and Stability. Get all ratings of GOGL here.

Bottom Line

While shipping remains a vital component of global trade, GOGL’s weak financial performance, low profitability, elevated valuation, and mixed sentiments among analysts collectively cast a cautious shadow on the outlook for GOGL's future performance. Thus, potentially avoiding investment in GOGL may be prudent for investors.

How Does Golden Ocean Group Limited (GOGL) Stack Up Against Its Peers? 

While GOGL has an overall grade of D, equating to a Sell rating, you may also check out these other stocks within the Shipping industry: Overseas Shipholding Group, Inc. (OSG), Teekay Corporation (TK), and StealthGas Inc. (GASS), with an A (Strong Buy) rating. For exploring more Shipping stocks, click here.       

What To Do Next?

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GOGL shares were trading at $8.81 per share on Thursday afternoon, down $0.02 (-0.23%). Year-to-date, GOGL has gained 6.15%, versus a 20.30% rise in the benchmark S&P 500 index during the same period.

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