Net-Net Imperial Petroleum (IMPP)
Oil and Dry Bulk Shipper In Deep Value Territory
I recently ran my deep value stock screen, looking for extremely strong balance sheets. I excluded biotech and finance companies. I came across 28 companies with a net current asset ratio over 10 and with positive sales growth.
One caught my attention, being a beaten down oil stock. Upon further inspection, I found that they have a couple dry bulk ships too. That was interesting to me considering how well many of the stocks in the dry bulk shipping industry have performed lately. Imperial has a total of ten vessels with two being dry bulk.
Imperial Petroleum ticker IMPP has net current assets of $105.72 million and a market cap of $46.5 million with the stock at $1.86 per share. So the stock is at a 56% discount to net current assets. Cash is $36.7 million and this combined with deposits are $98.6 million. So, the bulk of NCAV is in cash and equivalents.
Some of the not so great things are cash has declined from $50 million in the fourth quarter of 2022 and they do reverse splits. Although, they are cash flow positive in the last quarter and have a history of growing revenue and positive earnings. Another interesting thing to note is there are 8,499,999 Class E Warrants with an exercise price of $2.00 per share which is something to keep in mind as the stock price is getting closer to $2.00.
The stock at first appears to be a value trap based on the history of the stock price but I see the industry it is in giving it a good chance of near-term success. The price of crude oil has been trending up in the second half of the year. Also, the Baltic Dry Index which is an index of average prices paid for the transport of dry bulk materials across more than 20 routes has just soared to a new yearly high.
That oil and Baltic Dry Index strength has provided a lot of relative strength in many shippers like tickers SHIP DHT SBLK GOGL FRO just to name some of my favorites.
In final, I see Imperial IMPP as a good net-net to add to a basket of diversified deep value stocks.
Full Disclosure: I have no position at the time of writing. I may buy shares or call options in IMPP in the future.