The market is really looking forward right now, predicting the drop in earnings before it happens, so you don't see declining results hitting tankers yet. But the revenue pressure is on the horizon.
A high risk oil play
One thing that's difficult to assess with tanker companies right now is where their value lies. Looking at trailing earnings, Nordic American Tanker has a P/E ratio of 12.0, Frontline trades at 7.1 times earnings, and Teekay's P/E ratio is just 2.4. All of those look like great values, but will undoubtedly appear more expensive as earnings fall in the coming year.
For that reason, this is an industry I am steering clear of. It's just too difficult for any company to predict where supply and demand will land in any given year given the rapidly changing oil market. And unless global trade of oil picks up rapidly we could be in for years of oversupply in the tanker industry.
10 stocks we like better than Wal-Mart
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, the Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Wal-Mart wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as ofDecember 12 , 2016
The author(s) may have a position in any stocks mentioned.