Danaos Corporation (DAC): A Bull Case Theory

Published on August 16, 2025 at 10:42 pm by Ricardo Pillai in News, Stock Analysis

We came across a bullish thesis on Danaos Corporation on The Skeptical Optimist’s Substack by Dheeraj Namburu. In this article, we will summarize the bulls’ thesis on DAC. Danaos Corporation’s share was trading at $94.30 as of August 7^th. DAC’s trailing P/E was 3.87 according to Yahoo Finance.

Photo by Dorian Mongel on Unsplash

Danaos Corporation (DAC) enters 2025 in exceptionally strong financial shape. The company has aggressively deleveraged, reducing gross debt to $745M (from over $1.5B) with net debt of only ~$292M—resulting in a remarkably low Net Debt/EBITDA of ~0.4×. Liquidity stands at ~$825M, exceeding net debt. Interest costs remain modest at $46M despite rising rates, thanks to a largely fixed-rate debt profile.

Profitability is robust, with 2024 EBITDA margin at 71% and net margin at 52%. ROE was ~16%, while the EV/EBITDA multiple is just 2.6×—highlighting deep value. Danaos operates in two segments: its core container shipping generated $519.8M in adjusted net income, while dry bulk contributed modestly at $2.3M. Utilization remained high, and cost control remains a strength, with daily operating costs 9% below the industry average.

Looking ahead, visibility is strong: ~$3.7B of contracted backlog secures revenue through 2026, supporting 2025 EPS in the ~$22–$25 range. While earnings may taper as high-rate charters expire, staggered expirations and newbuilds with attached charters help smooth the transition. Management’s proactive charter strategy and likely scrapping of older vessels will also mitigate downside.

Capital returns remain disciplined. Danaos pays a $3.40 annual dividend (~4% yield) with a 12% payout ratio, and has retired 14% of shares via buybacks. With no equity dilution expected, strong FCF ($594M in 2024), and newbuilds fully financed, the company retains flexibility for opportunistic fleet expansion. Valuation remains compelling: shares trade at ~3× earnings and ~0.5× tangible book, with base case upside to $110 and bull case potential to $150.

Previously, we covered a bullish thesis on Danaos Corporation by Inflexio Research in May 2025, which highlighted its undervaluation, large backlog, and aggressive buybacks. The company’s stock has appreciated ~9.8% since the thesis played out. The thesis still stands given continued earnings strength. Dheeraj Namburu shares a similar view but emphasizes Danaos’s strong balance sheet and cost discipline.