Danaos Corporation (DAC): A Bull Case Theory

We came across a bullish thesis on Danaos Corporation (DAC) on Substack by Inflexio Research. In this article, we will summarize the bulls’ thesis on DAC. Danaos Corporation (DAC)'s share was trading at $86.57 as of May 16^th. DAC’s trailing P/E was 3.53 according to Yahoo Finance.

Danaos Corporation (DAC) offers a deeply compelling investment opportunity, trading at just 3.1x EPS and 0.45x book value while aggressively buying back shares—$33.7 million in Q1 2025 and an additional $19.4 million post-quarter. With over $3.7 billion in contracted backlog at a 70% EBITDA margin (equating to $2.59 billion in value) and an average charter duration of four years, investors are effectively purchasing the secured backlog alone and receiving Danaos’s hard assets and future earnings for free. Management continues to de-risk the business significantly; contracted revenue is essentially locked in through 2026 and likely into 2027, particularly as the shipping market strengthens due to a tariff pause. Despite potential rate fluctuations, Danaos is poised to generate EPS well above $17.62, and with the addition of 15 new ships beginning in late 2027, EPS could sustainably remain in the $27–28 range through 2032 and beyond.

Although shipping stocks often face investor skepticism due to the industry's historical volatility, Danaos operates more like a lessor, similar to aircraft or equipment leasing companies. If it manages its debt maturities prudently, a higher valuation multiple—based on ROE—becomes justifiable. Comparable transactions, such as Atlas Corp’s acquisition at 9x EPS, suggest DAC could be worth well over $200 per share. Meanwhile, investors are paid to wait, collecting a 4% dividend yield, enjoying consistent dividend hikes since 2021, and benefiting from shrinking share count and growing cash reserves.

Danaos Corporation (DAC) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 13 hedge fund portfolios held DAC at the end of the fourth 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.