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Is Seaspan Corporation (SSW) Destined for Greatness?

Investors love stocks that consistently beat the Street without getting ahead of their fundamentals and risking a meltdown. The best stocks offer sustainable market-beating gains, with robust and improving financial metrics that support strong price growth. Does nautical multitasker Seaspan Corporation (NYSE:SSW) fit the bill? Let’s take a look at what its recent results tell us about its potential for future gains.

Seaspan Corporation (NYSE:SSW)What we’re looking for
The graphs you’re about to see tell Seaspan Corporation (NYSE:SSW)’s story, and we’ll be grading the quality of that story in several ways:

Growth: Are profits, margins, and free cash flow all increasing?

Valuation: Is share price growing in line with earnings per share?

Opportunities: Is return on equity increasing while debt to equity declines?

Dividends: Are dividends consistently growing in a sustainable way?

What the numbers tell you
Now, let’s take a look at Seaspan Corporation (NYSE:SSW)’s key statistics:

SSW Total Return Price Chart

SSW Total Return Price data by YCharts

Passing Criteria 3-Year* Change Grade
Revenue growth > 30% 104.2% Pass
Improving profit margin 184.9% Pass
Free cash flow growth > Net income growth 125.4% vs. 273.4% Fail
Improving EPS 231% Pass
Stock growth (+ 15%) < EPS growth 177.3% vs. 231% Pass

Source: YCharts. * Period begins at end of Q2 2010.

SSW Return on Equity Chart

SSW Return on Equity data by YCharts

Passing Criteria 3-Year* Change Grade
Improving return on equity 240.8% Pass
Declining debt to equity (7.7%) Pass
Dividend growth > 25% 150% Pass
Free cash flow payout ratio < 50% 38.3% Pass

Source: YCharts. * Period begins at end of Q2 2010.

How we got here and where we’re going
Seaspan Corporation (NYSE:SSW) comes through with flying colors, missing out on a perfect score only because the company’s free cash flow, which has been increasing rapidly, calculates out to a lower percentage increase than its net income despite rising from a much lower starting point. Technicalities aside, this is certainly a noteworthy performance — but can Seaspan keep up its progress? Let’s dig a little deeper to find out.

Seaspan Corporation (NYSE:SSW) competitors STX Pan Ocean, TMT Group, and Excel Maritime Carriers have all filed for bankruptcy in recent months, which highlights both the precariousness of the industry and the opportunity for well-managed shippers to seize greater market share.

According to the International Monetary Fund, Seaspan’s three key markets, the U.S., Europe and China, are expected to see 2.7%, 2.8% and 7.7% GDP growth in 2014, respectively, which should certainly boost the global container trade market. Since 90% of global trade volumes were conveyed only via sea routes, Seaspan Corporation (NYSE:SSW) should be poised for continued growth.

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