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Oh what a graph

April 18th, 2008 · 2 Comments

This one is a real beauty, it’s from a Greek company called DryShips (Nasdaq: DRYS). we find it so beautiful that we post immediately for your viewing pleasure. What’s so special about it? Well, several things, really.


First, what a run-up! A glorious one. In June 2006 it was below $5, to reach $130 November last year. Cool! We understand it hasn’t done a lot since, this is the stuff of dreams. And, of course, the stuff of nightmares, as in November last year, the worries about the credit/housing crisis, and the state of the economy began in ernest.

Secondly, what happens next? We cannot help but think about that BBC Sports program, with the same title. They showed little pieces of matches, which were aborted, and then the quiz contenders had to guess what happened next. A winning formula, especially as it were usually mishaps that occurred next, like that hapless downhill skier that approached started with real gusto, only to falter within the first few meters. A classic.

What is going to happen next with our friend here which produced such a beautiful chart?? Consider the following facts:

  • it’s in the business of shipping (hey, what else, it’s Greek, never heard about Onassis?)
  • it ships mostly raw materials, coal, steel, grain, the so-called drybulk stuff, no wonder it’s booming
  • 2008 earnings are expected to be……. a whopping $18.39 per share (consensus estimates), which produces the stunning p/e of 4
  • the last four quarters they had a habit of beating consensus estimate by roughly 10%
  • revenue growth this year will be 50% or so
  • the chart is a an absolutely crucial point, sitting right at it’s 200 day moving average, and if you draw a line through the tops, it also happens to sit right on that one too. Actually, a little above it, which is why we think it’s likely that it will break out to the upside, rather than the downside

With a p/e of 4, is there something not to like? The only thing we can see is 2009 revenue and earnings estimates are actually quite a bit below those of 2008. Consensus estimate for 2009 earnings are $12.98, although the highest estimate is still $21.16. It’s quite a cyclical industry, and economic downturn is likely to affect shipping rates. But this company must be doing something right. We’ll watch it closely.

Tags: DRYS

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