About Hapag-Lloyd
Since we got a pretty good reception from our first European stock analysis on Worldline SA, we figured we’d provide our viewers another in-depth stock analysis on the fifth largest shipping company in the world, headquartered in Hamburg, Germany, Hapag-Lloyd.
In essence, the company is a gigantic shipping and transport company that is well-known for its usage of maritime equipment, primarily container ships (over 200 to be somewhat exact).
They transport containers of goods and products all around the globe and have proven themselves to be more important than ever amidst the current supply chain mess.
While the company has been around for a very long time (founded in 1847) and has proven itself to be a critical, relied-upon company for the future, it doesn’t mean that one should necessarily invest in the company’s stock.
That’s why we’re here!
We want to help you and our team get a better idea of the financials behind the company, how well the company’s management is performing and whether or not the company itself (and of course, its stock) will perform well moving forward.
Without further or do, let’s dig into Hapag-Lloyd’s financials.
Hapag-Lloyd’s stock financials
The company currently has a market capitalization of approximately $49 billion and quite an attractively low price-to-earnings (P/E) ratio of 4.11. If you haven’t read our previous posts, it is generally accepted that a stock with a P/E ratio of 20 indicates a company’s stock is trading at fair value or trading at what its actually worth paying for. On the other hand, if the stock’s P/E ratio is higher than 20, it is generally said that the company’s stock is overvalued and below 20 is considered undervalued.
According to this metric alone, the shipping company’s stock is well below fair value, possibly presenting prospective or current investors an opportunity to buy shares at a significant discount.
However, we’re not going to rely on this metric alone. Let’s get a better feel for the financial strength of Hapag-Lloyd.
Before continuing however, it would be wrong if we didn’t point out that the company currently offers investors significantly higher dividend than we’ve seen from any of the stocks we’ve analyzed before. Specifically, the company recently announced that it will be offering shareholders an annual dividend of around $36 per share.
That is a huge dividend.
And this is a huge ship!
To put this into perspective, some of the higher annual dividends we’ve seen from American companies are around $6.
While this is potentially a great sign for shareholders in itself, if the company can’t afford to pay the dividend at a consistent rate in the future, we’re not interested. We’d much rather invest in a company with a lower yet consistent dividend that the company can undoubtedly afford to pay out for years to come.
Similar to the company’s astoundingly low P/E ratio, this requires further investigation.
According to Hapag-Lloyd’s balance sheet, the company oversees (or overseas, pun intended) around $26.7 billion in total assets and nearly $10.6 billion in total liabilities. This is a fantastic, trim balance sheet with heavy favor towards total assets. This makes our team confident given that they’ve kept the balance sheet strong during times of chaos, uncertainty and rising costs.
Moving over to the company’s income statement, their total revenue has been on the rise in the past five years. For instance, their total revenue in 2017 stood at around $10 billion, climbed up to nearly $11.7 billion in 2018 and eventually ascended to around $22.3 billion in 2021.
Our team is uncertain as to whether or not this continual rise in total revenue will continue at this current rate, however we do believe that the company’s total revenue will continue to generally rise for years to come given the heightened demand for their capabilities and services.
Nonetheless, this recent climb is impressive.
Side-stepping over to Hapag’s cash flow statement, their net income has been positive over the last five years and has also been substantially rising.
To put this rise in perspective, the company’s net income in 2017 was $33 million, which eventually grew to just over $9 billion in 2021.
Demand, demand and more demand.
Hapag-Lloyd’s stock fundamentals
It’s quite encouraging that while this company and the shipping and logistics industry as a whole has seen a lot of choppy water (again, pun intended), Hapag-Lloyd has performed quite well and ultimately provided for its customers across the globe.
However, getting back to the company’s numbers some peg their net profit margin to be slightly above 40% (which is fantastic in its own right) which can also be seen favorably as it stands higher than one of its largest competitors, Maersk, as their net profit margin sits at approximately 35%.
This can possibly be attributed to the fact that Hapag-Lloyd isn’t as large as Maersk and can simply find more ways to carve out a profit within its relatively smaller operations, however, make no mistake about it, Hapag is still a gigantic container shipping company, but Maersk just happens to be bigger.
European regulatory considerations
We feel it is important to mention that outside of Hapag-Lloyd appearing to be a quality company with a lot to offer current and prospective shareholders, the company’s stock doesn’t currently trade on American exchanges. Specifically, while its likely that shares of Hapag-Lloyd can be purchased through your brokerage account, the stock itself trades on the “XETR” (as opposed to the NYSE, NASDAQ etc…), which is described as “a trading venue operated by Frankfurter Wertpapierborse, based in Frankfurt, Germany.”
While our team doesn’t claim to be experts on the rules and regulations of the NYSE and NASDAQ, we know that there are people stateside available to email, call or contact in the event of any issues with our shares or investments.
Things can get complicated when dealing with overseas exchanges as they simply have different laws and legal bodies across the pond.
While this shouldn’t necessarily deter you from considering investing in European stocks (or other international companies for that matter), this is a risk that you should feel comfortable taking prior to investing in any international stocks.
Should you buy Hapag-Lloyd stock?
Barring our general regulatory concerns, Hapag-Lloyd seems like a very strong company.
They pay a huge annual dividend, the stock itself seems grossly undervalued and the company itself has performed well during one of the most challenging periods of supply chain pandemonium ever. Along with their overall solid financials and prospects moving forward, we give the company a “buy” rating.
DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.