We came across a bullish thesis on Danaos Corporation (DAC) on Substack by Value Science. In this article, we will summarize the bulls’ thesis on DAC. Danaos Corporation (DAC)’s share was trading at $78.95 as of Dec 12th. DAC’s trailing P/E was 2.73 according to Yahoo Finance.
A large shipping container vessel with cranes in motion on the open sea.
Danaos Corporation delivered a strong quarter, securing $308 million in new contracts, equivalent to $15.78 in revenue per diluted share. These agreements bolster the company’s discounted cash flow (DCF) valuation, which now stands at an estimated $125 per share. The contracts demonstrate the resilience of the chartering market, with Danaos securing deals for vessels as old as 27-28 years at profitable rates of approximately $21,000 per day, well above average operating and voyage expenses of $8,063 per day. These results exceed expectations, as older vessels were conservatively modeled for scrapping in the absence of charters. While the market conditions driving this performance may not last indefinitely, each quarter of sustained strength adds meaningful value.
Management indicated additional contracted revenue since the quarterly release, suggesting the potential for further upside in the near term. Their cautious approach to newbuildings, pausing orders until prices normalize, reflects disciplined capital allocation. This restraint is reassuring and positions Danaos for long-term growth, though it requires investor trust in management’s ability to reinvest profits effectively, rather than prioritizing immediate shareholder returns.
Capital distributions showed modest improvements. Buybacks totaled $6.3 million in Q3, with an additional $17.8 million so far in Q4, representing progress but remaining below expectations. A small dividend increase from $0.80 to $0.85 per share signals incremental confidence from management, supported by increased charter coverage. While these steps indicate cautious optimism, they also emphasize a conservative stance on immediate capital returns. Overall, Danaos offers a compelling investment case with significant operational momentum though its focus on reinvestment and disciplined growth may temper near-term appeal for some investors.
Danaos Corporation (DAC) is not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 12 hedge fund portfolios held DAC at the end of the third quarter which was 12 in the previous quarter. While we acknowledge the risk and potential of DAC as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than DAC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.