ZIM Stock: A Diamond in The Rough?
2022 has not been an easy year for stock investors. Almost all major indexes are down over 20% YTD and many individual stocks are down much more. On top of that, the global economic picture is bleaker than ever. There is a land war in Europe, record inflation, and the lingering impact of COVID-19. But, despite all this turbulence, you can still find a few gems if you do enough digging. ZIM stock may very well just be one of those gems. Let’s take a closer look.
ZIM (NYSE: ZIM) Stock Forecast
ZIM Integrated Shipping Services is one of the world’s leading shipping and logistics companies. It offers solutions for refrigerated, dangerous, and hazardous cargo. The company’s headquarters are based in Haifa, Israel. ZIM was founded in 1945 and employs just under 6,000 people.
ZIM recently enjoyed a record year in 2021 and posted annual revenue of $10.73 billion. This figure was up 168% year-over-year (YoY). It also posted a net income of $4.64 billion, up 795% YoY. More recently, ZIM reported a Q1 2022 revenue of $3.72 billion, up 113% YoY. It also reported a net income of $1.71 billion, up 190% YoY.
Despite operating since 1945, ZIM was just recently listed on the NYSE. Since going public, its stock is up 268%. However, it is down 21% so far in 2022.
The most interesting thing about ZIM stock is its current valuation. Let’s discuss that further.
Is ZIM Stock a Buy? Potential Upsides
ZIM currently has a market capitalization of $5.33 billion. For the amount of cash flow that ZIM generates, this is wildly low. In fact, it’s only about half of ZIM’s 2021 annual revenue. This effectively means that ZIM is valued significantly lower than its total sales from last year.
In general, most blue chip companies are valued at around 20-30 times their earnings. In the shipping industry, most companies trade at a much lower P/E ratio of around three. ZIM stock currently trades at a P/E ratio of under 1. This is a sign that the company is undervalued, even amongst its competitors. This is especially true when you consider ZIM’s impressive revenue growth over the past year.
ZIM stock has performed well since its IPO and is up 280%. But, the stock is down 20% so far in 2022. While searching for an explanation, one might think that something has gone wrong since last year. With the COVID-19 disruption to shipping lines, there was probably a major disruption to ZIM’s business. This doesn’t seem to be the case.
In Q1, ZIM had $4.82 billion in cash and short-term investments on its balance sheet. This means that investors are valuing ZIM at just slightly over its cash on hand. This doesn’t even include ZIM’s $12.32 billion in total assets. Or the fact that Q1 revenue was up 113% YoY.
Another potential reason for this stock price decrease might be that management is be projecting slower growth in the future. After all, the shipping industry has been through the ringer this past year. It makes sense that a slowdown might be coming. But, this isn’t the case either. The management team is incredibly optimistic about the future.
Eli Glickman, ZIM’s CEO, stated this when referencing Q1 earnings, “We once again generated our highest-ever quarterly revenues, net income, and adjusted EBITDA while achieving industry-leading margins.”
He also goes on to stake that ZIM stock has:
- Launched 10 new lines since the beginning of 2022.
- Increased carried volume quarter-over-quarter during a time when overall industry volume decreased.
- Retained a strong balance sheet.
On the same call, he stated that the rest of 2022 looks favorable. The company has secured long-term contracts at rates higher than in 2021. This is impressive, considering that 2021 was a already record year for the company. For this reason, Glickman believes that the company can achieve “superior profitability”. On the same call, he increased guidance for the rest of 2022.
At this point, remember that the company also pays a dividend yield of 25%. In today’s current investing environment, it’s almost worth buying ZIM stock for the dividend alone. When you add in the fact that revenue is increasing and guidance is up ZIM stock most certainly seems like a diamond in the rough.
Is ZIM Stock A Buy? Potential Downsides
From every metric I’ve looked at, ZIM stock looks like a rare no-brainer. It runs a highly profitbale business in a fairly recession-proof industry. The company also offers plenty of upsides for investors:
- Valued incredibly cheaply (based on a handful of different metrics).
- Pays a massive dividend payment.
- Has impressive revenue/profitability growth.
- Has a management team that’s raising guidance.
Based on these factors, it’s safe to declare ZIM stock a rare diamond in the rough during an especially tough economic period.
With that said, we are still in the midst of a economic recession and there is a lot of uncertainty swirling around. June inflation just set a new recent high and there is no telling when it will slow down. The same is true for gas prices. On top of that, the Russia/Ukraine war is raging on. These factors are causing investors to behave a little bit irrationally.
In other words, there is still a chance that ZIM stock decreases in the short term. If this happens, it will most likely be for reasons outside of the company’s control. For example, it’s entirely possible that another COVID-19 outbreak occurs. If this happens, it could drastically reduce the need for global shipping which would hurt ZIM’s business. This is why it’s important to always look at every worst-case scenario before making an investment.
I hope that you’ve found this ZIM stock forecast to be valuable! Please remember that I’m not a financial advisor and am just offering my own research and commentary. As usual, please base all investment decisions on your own due diligence.