Time to Buy, Hold, or Take Profits in Euroseas (ESEA) Stock?

A few months ago, I highlighted Euroseas ESEA as a top transportation stock to buy for higher highs in early June and even selected the company as my "Ultimate" pick for a stock that was poised to move higher throughout the quarter.

It’s very gracious to say that ESEA has delivered, now soaring nearly +70% in the last three months and recently hitting a new 52-week peak of $65 a share.

However, this certainly begs the question of whether it's still time to buy or hold stock in the well-established shipping container company or take profits.

Euroseas’ Operational Excellence & High Charter Rates

Euroseas’ blazing stock performance has been attributed to its operational excellence, taking advantage of high charter rates, with the company earning $29,420 per day per vessel during Q2.

Having a solid niche in the feeder and intermediate containership segment, Euroseas operates on a smaller scale than shipping giants like Maersk, Kirby Corporation KEX, or Matson MATX, but has separated itself from many of its transportation shipping peers through its focus on fleet efficiency, timely investments, and cyclical market opportunities rather than dominating global trade routes.

As a more specialized agile shipping operator, it’s noteworthy that 90% of Euroseas’ fleet is under profitable long-term charters, with feeder and intermediate containerships being in high demand and short supply. Correlating with such, Euroseas impressively exceeded earnings expectations earlier in the month with Q2 EPS at $4.20 compared to estimates of $3.87.

Positive EPS Revisions

Following the impressive Q2 earnings beat, Euroseas’ fiscal 2025 EPS estimates have risen 7% over the last 30 days from projections of $15.47 per share to $16.61.

In the last year, these revisions have skyrocketed more than 112% as also illustrated above, with Euroseas’ annual earnings now expected to increase roughly 12% in FY25 and projected to rise another 7% in FY26 to $17.74 per share, as shown below.

Euroseas is highlighted as a Top Income Stock

Highlighted by Zacks Equity Research for its strong income characteristics, Euroseas has reinforced investor confidence by lifting its quarterly dividend by 7% from $0.65 per share to $0.70.

This also marks Euroseas’ second dividend increase within the last year, consistently increasing its payout since implementing a dividend in June of 2022. More impressive, Euroseas’ dividend yield is currently at 4.19% topping its Zacks Transportation-Shipping Industry average of 3.74% and towering over the S&P 500’s 1.15% average.

Monitoring Euroseas’ Valuation

Despite a magnificent rally, Euroseas' stock still trades at just 3.7X forward earnings, which is intriguingly beneath its industry average of 7.4X and a steep discount to the S&P 500’s 24.6X. Plus, ESEA trades under the preferred level of less than 2X forward sales.   

Bottom Line

While it makes sense to take some profits in Euroseas stock if needed, ESEA sports a Zacks Rank #1 (Strong Buy) at the moment and could still have a nice amount of upside considering its cheap P/E valuation and the trend of positive EPS revisions for FY25. Euroseas’ shareholder-friendly approach has also made its stock desirable to keep in the portfolio in regard to sharing its profitability through a very generous dividend.  

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This article originally published on Zacks Investment Research (zacks.com).

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