Issue #28

Inflation Hedge at Sea:
2 Shipping Giants Turning Volatility into Growth ⚓

The global shipping industry is back in the spotlight — as inflation, trade shifts, and energy demand reshape the world’s supply chains. From oil tankers moving vital crude to container carriers powering global commerce, this sector is quietly generating record profits while much of the market treads water.

👉 One company is locking in multi-year tanker contracts with energy giants at sky-high day rates.
👉 The other is dominating container routes with modern, fuel-efficient vessels and long-term charter coverage.
👉 Both are trading at valuations so low, they look like hidden gems in plain sight.

In this edition, we break down two inflation-proof shipping stocks navigating strong tailwinds — and why they could deliver smooth sailing into 2026.

Performance Shipping (NASDAQ: PSHG)

Performance Shipping Inc. (NASDAQ: PSHG) is a Greece-based global shipping company that specializes in the ownership and operation of tanker vessels. With a strategic focus on the Aframax and Suezmax segments of the oil tanker market, the company's core business is the sea-borne transportation of crude oil and refined petroleum products. As global energy demand and oil trading routes shift, PSHG is positioned to capitalize on the critical role its fleet plays in the world's energy supply chain.

Business Model and Revenue Streams 📦

Performance Shipping’s business model is centered on owning a modern, fuel-efficient fleet and deploying these vessels under various charter agreements. The model is highly capital-intensive, relying on strategic vessel acquisitions, financing, and robust operational management. The company's revenue streams are primarily driven by two types of contracts:

• Time Charters: This is a key revenue stream, where the vessel is chartered to a customer (like a major energy company or oil trader) for a fixed period at a predetermined daily gross charter rate (e.g., $36,500 per day). The charterer pays for fuel and voyage expenses. This model provides stable, predictable, long-term revenue visibility and is particularly favored during periods of market volatility.
• Spot Voyages/Pool Arrangements: These are single-voyage contracts or participation in a vessel pool. This exposes the company to the immediate market rate, offering the potential for high revenue during peak demand but also risk during market downturns.

Impact of Current Macroeconomic Policies and Inflation:

The shipping industry's profitability is directly linked to global trade volumes and, for oil tankers, energy market dynamics.

• Inflation & Energy Prices: High inflation often coincides with strong global commodity demand and high energy prices. This boosts demand for oil transportation, leading to significantly higher charter rates—the company's core revenue driver. Thus, PSHG's cash flow can act as a hedge against inflation due to its exposure to rising day rates in the spot market and the ability to lock in high fixed rates on long-term time charters.
• Geopolitical and Supply Chain Disruption: Current geopolitical tensions and shifting oil trade routes (e.g., longer voyages due to sanctions or regional conflicts) increase the Ton-Mile Demand (cargo volume multiplied by distance traveled). This effectively tightens the supply of available vessels, pushing day rates higher and strengthening the company's earnings.
• Monetary Policy (Interest Rates): As a capital-intensive business, PSHG is sensitive to rising interest rates, which increase the cost of financing its debt and new vessel acquisitions. However, the recent securing of high-rate, long-term charters helps mitigate this risk by providing a robust, visible revenue stream to cover debt obligations.

Recent Performance and Corporate Developments 📈

Performance Shipping has been aggressively executing a fleet modernization and expansion strategy, which has dominated its recent corporate news and promises to significantly enhance its future performance.

Recent Acquisitions and Charter Contracts (Q4 2025): 🤝

The most significant recent developments include:

• Suezmax Fleet Expansion and Long-Term Charter: The company recently announced the acquisition of two modern (2019-built), eco-design Suezmax tankers for a combined $150.9 million. Immediately following this announcement, the company secured three-year time charter contracts with Repsol Trading S.A. for both vessels at a gross rate of $36,500 per day each, expected to generate approximately $78 million in gross revenue over the minimum term.
• Aframax Time Charter: In a separate deal, PSHG secured a two-year time charter with SeaRiver Maritime (a wholly-owned subsidiary of ExxonMobil) for an Aframax tanker at a gross daily rate of $30,500.

These strategic moves have massively increased the company's revenue visibility, with its total fleetwide contracted revenue backlog now sitting at approximately $335 million, providing a high degree of revenue certainty and coverage for 70% of 2026 and 57% of 2027 fleet days.

Financial Performance (Based on latest available data from late 2024/mid-2025 releases): 💰

While the exact details for Q3 2025 may not be released, prior periods have shown strong profitability:

• Net Income: The company reported a significant surge in profitability for the fiscal year 2023, with Net Income rising to $42.9 million from $28.5 million in 2022. This was driven by a substantial improvement in its Time Charter Equivalent (TCE) rate.
• High Profitability Metrics: The company boasts exceptionally high profitability metrics for its industry, with a Net Profit Margin nearing 70% and a Gross Margin of over 71% (Trailing Twelve Months data).

Path to Profitability and Fair Value 🎯

Performance Shipping is currently highly profitable, having been so for several years, with an impressive trailing 12-month Price-to-Earnings (P/E) ratio of just 1.3—significantly lower than the industry average.

Path to Sustained Profitability:

The path is secured through its long-term time charter strategy. By locking in high-margin, multi-year contracts with reputable charterers like ExxonMobil and Repsol, PSHG ensures a stable cash flow stream that insulates it from short-term spot market dips and covers its substantial operating and debt costs. The focus on modern, eco-design vessels also future-proofs the fleet against tightening environmental regulations, which are a major long-term risk for older fleets.

Fair Value:

The stock is widely considered to be undervalued based on traditional metrics:

• P/E Ratio: The trailing P/E of around 1.3 is dramatically lower than the industry average, signaling that the stock price is extremely low relative to its recent earnings.
• Price-to-Book (P/B) Ratio: A P/B value often below 0.10 suggests the market is valuing the company at a small fraction of its net asset value, which is highly unusual.
• Analyst Price Target: The average 12-month price target from analysts is approximately $5.36, representing a potential upside of over 150% from the current price (around $2.10).

Analyst Estimates and Ratings 📊

The company currently enjoys a highly favorable consensus from the few analysts who cover the stock, with a clear focus on the significant undervaluation and earnings visibility.

• Consensus Rating: The consensus rating from firms covering PSHG is a "Buy" or equivalent "Outperform." The rating is 100% Buy, with no Hold or Sell ratings reported recently.
• Recent Ratings: Alliance Global Partners, HC Wainwright & Co., and Jefferies have all initiated or maintained a "Buy" rating.
• Price Target: The analyst consensus 12-month price target is approximately $5.36 (with a high of $6.82 and a low of $4.04). This strong consensus and high target price are directly driven by the company's compelling valuation and newly secured high-rate charters, which provide strong earnings estimates for 2026 and 2027.

Investor-Focused Takeaway: Is PSHG Right for Your Portfolio?

Performance Shipping (PSHG) offers a classic value-play in the cyclical marine shipping sector. Its "inflation-proof" quality comes from its exposure to the robust tanker market, where strong energy demand drives high charter rates.

The company's recent strategic pivot to acquire and immediately charter modern, high-spec Suezmax vessels at exceptional rates has significantly de-risked its future revenue. The extremely low P/E ratio and the high consensus price target suggest the stock is significantly undervalued by the market relative to its proven profitability and future earnings visibility.

What to Watch in the Near Term: 🚢

• Tanker Supply/Demand: Continued tightness in the global tanker fleet and high Ton-Mile demand due to geopolitical factors are key to maintaining high rates.
• Delivery of New Vessels: Watch for the timely and successful delivery and commencement of the new Suezmax charters (expected by early 2026), as this will be critical to realizing the projected revenue growth.
• Further Fleet Expansion: Monitor for additional strategic vessel acquisitions, which could signal continued confidence in the long-term tanker market.

Recommendation:

Performance Shipping (PSHG) is viewed as a compelling long-term buy due to its extreme undervaluation, high profitability, and recent aggressive strategy to lock in multi-year, high-rate contracts that provide robust earnings visibility and an organic hedge against a high-inflation, high-energy-demand environment.

Euroseas Ltd. (NASDAQ: ESEA)

Euroseas Ltd. (NASDAQ: ESEA) is a specialist in the ownership and operation of container carrier vessels, focusing on the highly profitable intermediate and feeder segments. As a vertically integrated company with a deep-rooted shipping history, Euroseas provides essential ocean-going transportation services, acting as a critical link in the global supply chain by chartering its fleet to major container lines worldwide.

Business Model and Revenue Streams 📦

Euroseas' business model is a textbook example of a tonnage provider in the container shipping industry. It invests in and maintains a fleet of container ships, which it then leases out to liner companies (like Maersk, CMA CGM, etc.) under various charter arrangements. The model is structured to minimize operational risk and maximize revenue certainty:

• Time Charters (Core Revenue Stream): The overwhelming majority of ESEA's revenue is derived from fixed-rate time charters. Under these long-term agreements (often lasting 1 to 5 years), the charterer takes over the commercial operation of the vessel and pays a pre-determined daily gross charter rate to ESEA. This provides a highly visible and stable revenue stream, protecting the company from short-term volatility in spot rates and guaranteeing a minimum level of cash flow.
• Newbuilding Program: A significant component of the strategy is its ongoing newbuilding program, which focuses on modern, eco-friendly, intermediate, and feeder-sized vessels. These modern ships command premium charter rates (often $3,000-$5,000 per day more than older vessels) due to their superior fuel efficiency and compliance with stricter environmental regulations.

Impact of Current Macroeconomic Policies and Inflation:

The container shipping sector is one of the most immediate beneficiaries of high inflation driven by strong consumer demand and supply chain constraints.

• Inflation & Global Trade: Strong economic activity and corresponding high inflation typically lead to robust global trade volumes, increasing the demand for container shipping slots. This surge in demand relative to vessel supply drives container charter rates to extremely high levels, which ESEA has successfully capitalized on by locking in multi-year, profitable charters.
• Geopolitical/Supply Chain Dynamics: Disruption, such as that seen in the Red Sea or during the post-pandemic supply chain boom, dramatically increases shipping distances and delays. This effectively reduces the usable capacity of the global fleet, leading to a scarcity of available vessels and creating a pricing environment highly favorable to owners like ESEA. The company's revenue is thus structurally hedged against inflationary pressures tied to strong global logistics.
• Interest Rates: Like its peer PSHG, ESEA has debt associated with its capital-intensive fleet. Rising interest rates could increase financing costs; however, its substantial, contracted cash flow from long-term charters provides a strong buffer against this expense.

Recent Performance and Corporate Developments

Euroseas has delivered multiple quarters of strong earnings, driven by the execution of its fleet renewal and charter strategy.

Q2 2025 Financial Highlights (Reported August 13, 2025): 💰

• Net Income: The company reported a net income of $29.9 million (or $4.32 EPS basic), significantly outperforming Q2 2024.
• Earnings Beat: Non-GAAP EPS of $4.20 beat analyst estimates of $3.29 by a wide margin, and revenue of $57.2 million topped estimates as well.
• Charter Rate Strength: The fleet achieved a strong average daily time charter rate of $29,420 per day, demonstrating the value of its contracted revenue.
• Dividend & Buyback: The company increased its quarterly common stock dividend to $0.70 per share and continued its share repurchase program, indicating confidence in future cash flows.

Strategic Initiatives and Mergers: 🤝

• Charter Extensions and Coverage: A key recent move (Sept 2025) was securing a 1-year charter extension for a feeder containership at a much higher daily rate of $25,000 (a $5,000 increase). This bolstered ESEA's revenue visibility to 100% charter coverage for the remainder of 2025 and approximately 70% for 2026.
• Fleet Renewal and Expansion: In August 2025, ESEA announced an order for two additional 4,300 TEU eco-friendly containerships for 2028 delivery, building on its successful nine-vessel newbuilding program. This focus on modern, fuel-efficient ships positions ESEA to earn premium rates and meet future regulatory demands.
• Spin-off: The company recently completed the spin-off of three of its oldest vessels into EuroHoldings Ltd. (NASDAQ: EHLD), a move designed to streamline ESEA's focus on its modern container fleet while giving shareholders more flexibility for the older, potentially higher-risk assets.

Path to Profitability and Fair Value 🎯

Euroseas is highly profitable, boasting exceptionally strong margins. Its path to sustained financial strength is built upon its long-term charter book.

Key Profitability Metrics:

• Profitability Score: ESEA has an exceptional profitability score, driven by a Gross Margin of over 74% and a Net Profit Margin nearing 54% (TTM).
• P/E Ratio: The company’s Trailing 12-Month Price-to-Earnings (P/E) Ratio is approximately 3.4x, which is remarkably low and suggests significant undervaluation relative to the broader market and even its shipping peers.

Fair Value:

Based on Discounted Cash Flow (DCF) and analyst estimates, ESEA is considered to be significantly undervalued.

• Intrinsic Value: Some valuation models estimate the intrinsic value of ESEA stock to be around $75.84, indicating the stock is undervalued by over 21% compared to its current price (around $59.74).
• Analyst Price Target: The analyst consensus 12-month price target is approximately $75.14 (with a low of $71.71 and a high of $78.75), suggesting a potential upside of over 25%.

Analyst Estimates and Ratings 📊

ESEA receives overwhelmingly bullish sentiment from the analyst community, driven by its financial performance and strong charter coverage.

• Consensus Rating: The consensus rating from analysts covering ESEA is a "Strong Buy" or "Moderate Buy."
• Recent Ratings: Firms covering the stock have maintained or initiated "Strong Buy" ratings, with 100% of tracked analysts currently recommending a Buy. This high conviction reflects the company's clear earnings visibility over the next few years.
• Earnings Estimates: The consensus EPS estimate for Fiscal Year 2025 is approximately $19.09, with an even stronger outlook for 2026. This confidence is rooted in the high-rate, long-duration charters already signed.

Investor-Focused Takeaway: Is ESEA Right for Your Portfolio?

Euroseas (ESEA) offers an investment opportunity in the highly lucrative container shipping market, positioning itself as an inflation-resistant stock through its ability to lock in long-term, high-rate charters during periods of elevated global trade and supply chain tension.

The company is currently significantly undervalued based on its trailing earnings and future cash flow projections, as reflected by its low P/E ratio and high consensus price target. ESEA’s strategy of renewing its fleet with eco-friendly ships while securing long-term contracts minimizes operating risk and maximizes shareholder returns through consistent dividends and share buybacks.

What to Watch in the Near Term: 📈

• Container Market Strength: Monitor global container spot rates as they influence the rate at which ESEA can re-charter its vessels once current contracts expire.
• Newbuilding Status: Keep an eye on the progress and chartering of the new eco-vessels, as these will drive the next phase of earnings growth.
• Operational Execution: Continued strong operational efficiency and high utilization rates are key to maintaining its sector-leading margins.

Recommendation:

Euroseas (ESEA) is viewed as a Strong Buy candidate, supported by a healthy, contracted earnings outlook, a focus on modern, efficient vessels, and a valuation that analysts believe is deeply discounted relative to its true earning power.

⚓ Final Take: Two Inflation-Proof Shipping Stocks Sailing Full Steam Ahead

In an environment where rising costs and global uncertainty challenge most industries, Performance Shipping (PSHG) and Euroseas (ESEA) are proving that smart fleet strategy, long-term charters, and global trade dynamics can turn volatility into value.

Both stocks offer deep value, strong cash flow visibility, and built-in inflation hedges—making them rare gems for income-seeking or value-oriented investors.

🚢 Performance Shipping (PSHG) – Tanker Titan Riding the Oil Boom
✔ $335M+ contracted revenue backlog with energy majors (ExxonMobil, Repsol)
✔ Suezmax and Aframax time charters locked at record day rates
✔ P/E under 2 and analyst price target implies 150%+ upside
➤ Best for: Value investors seeking a high-margin, oil-linked play with built-in inflation protection and steady cash flow.

📦 Euroseas Ltd. (ESEA) – Container Champion With Premium Charter Coverage
✔ 100% chartered for 2025, 70%+ for 2026 — strong earnings visibility
✔ Modern, eco-friendly fleet earns premium rates and meets green standards
✔ Dividend growth + active buyback = strong shareholder return strategy
➤ Best for: Investors looking for exposure to global trade momentum with high dividend yield and expansion-driven upside.

Investor Insight:

🛢 Want stable, oil-linked earnings with long-term contracts locked at cycle highs? → PSHG
​ 📦 Want to capture global trade growth with modern ships and visible container revenue? → ESEA

With modern fleets, strong backlogs, and near rock-bottom valuations, these two shipping stocks are navigating macro volatility with confidence—and could deliver market-beating returns well into 2026.​
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Happy Trading
​— Team Premium Stock Alerts