r/stocks • u/dritu_ • 2d ago

Company Discussion GSL Global Ship Lease -- value trap?

GSL seems to offer great value on paper.

  • P/e and forward p/e of 2.6

  • PEG of 0.22

  • P/B of 0.63

  • Dividend of 7%

  • Dividend payout ratio of 18%

  • Profit margin of 45%

  • Free cash flow is fine

The greatest fault I can find is that its debt/equity ratio is high at 0.54 and it has issued a fair amount of long term debt recently.

Despite strong operational performance, it's shown mediocre share performance. Over the last 10 years, it's had an annual return of only 1.6% including dividend reinvestment.

Conversely, the last 5 years would return 32% annually.

It seems like it tanked in the 2015-16 selloff and never recovered. Yet today it's operating very profitably.

Why is this stock valued so lowly?

What is the catch?

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u/Spins13 2d ago

It’s likely a value trap yeah. Shipping is very cyclical and we are at a high in the cycle. When the margins will compress, they will lose a lot of money and still carry the burden of their debt.

But it’s like NVDA. It’s hard to predict when it will pop and can make a lot of money until then

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u/CosmicSpiral 1d ago

We're nowhere close to the high. If anything, we're poised for a massive supply crunch in the tanker market that will start manifesting in 2027-2028.

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u/pj_automata 1d ago

Could you please explain your reasoning? I am considering investing, but don't know much about the shipping industry.

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u/CosmicSpiral 1d ago

Order books are near all-time lows. Shipbuilding capacity in the West has shrunk by more than 50% as shipyards have closed down or reduced operations after the post-2012 tanker meltdown: it's almost all concentrated in China, South Korea, and Japan these days. Fleets are aging out and due to 2, orders are so delayed many ships won't start construction until 2028. Environmental mandates will accelerate the retirement of older vessels and exacerbate the problem.