ZIM stock is up 43% in the past 90 days and technically had a 50% dividend yield last year.
ZIM Integrated Shipping Services (ZIM) provides container shipping and related services in Israel and internationally. As of March 1, 2024, ZIM operated a fleet of 150 vessels, including 134 container vessels and 16 vehicle transport vessels.
The stock is down big in the past 3 years with a -54.6% price return, but shares have climbed 43.4% in the past 90 days due to analysts expecting a stronger year ahead in 2024:
Today, analysts give ZIM a consensus price target of $17.28, implying that there’s currently an 8.6% downside for shares to reach fair value at the stock’s current price of around $19/share.
What is the outlook for ZIM stock?
As the graph below shows, $ZIM has experienced very volatile revenue growth since going public in 2021.
Revenue dipped significantly for ZIM in 2023, which inevitably sent the company’s share price crashing down.
But, analysts expect a rebound in ZIM’s revenue in 2024, with the consensus estimates calling for 33.6% revenue growth in fiscal year 2024. This would help to recover some of the revenue declines ZIM saw in 2023:
You might be thinking, “How do I know if analysts’ estimates will be right?”
Well, you really don’t know what kind of sales a company will see until it happens because not even the smartest analysts on Wall Street can predict the future.
Analysts regularly make the wrong calls.
But, one positive sign that ZIM will see strong revenues in 2024 is that the company has already seen a strong first quarter, with revenues up 13.7% year over year:
Q1 is already in the books, and analysts expect the company to continue to see stronger results than last year.
ZIM will release its second-quarter results on August 19th, which will help to determine whether the analysts’ estimates were right.
See ZIM’s full analyst estimates >>>
Revenue growth drives everything for ZIM
Revenue growth is so important for ZIM because when the company sees strong revenues, this translates into higher profits and allows the business to pay shareholders big dividends.
We focus a lot on revenue growth, especially with a company like $ZIM, because $ZIM has a high amount of fixed costs that it has to pay regardless of the revenue it makes.
Big revenue increases can lead to booms for ZIM’s business, but when revenues are low, the business might report a loss, cut its dividend, and send the share price plummeting.
The graph below shows how higher revenues for ZIM are expected to drive a net profit for the company in 2024:
See the past 12 years of ZIM’s financial results >>>
Could ZIM’s 50% dividend yield ever return?
There was an interesting phenomenon in 2023 where ZIM had a 50% dividend yield.
The company paid $10.55 in dividends per share for 2022. ZIM’s share price fell midway through 2022 when the company gave lower sales estimates for 2023. In 2023, the stock traded at under $20 at times.
This meant that the company’s last twelve-month dividend yield was 50%+. However, shareholders never actually saw a 50% dividend because management cut the dividend in 2023 when revenues dropped.
ZIM paid a dividend of $0.23 per share for the first quarter of 2024 on June 11th. Analysts expect ZIM to see a similar dividend in Q2 and Q3 of this year, with a small dividend in Q4:
(ZIM’s $0.23 dividend paid in Q1 of 2024 is missing from this graph.)
With the $0.23 dividend paid in Q1, analysts expect a total dividend of $0.97 for 2024. With the stock currently trading at about $20 per share, if these dividends are actually paid, the stock would have a dividend yield of about 4.9%.
So seeing a 50% dividend yield again would be pretty unlikely.
No one knows if the company will see strong sales and pay the anticipated dividend, so the 4.9% estimated dividend yield might be interesting for investors with a high risk profile who think the stock is undervalued.
See analysts’ full dividend estimates >>>
Is ZIM’s debt high?
We like to assess every stock’s financial safety. Our two favorite metrics are Net Debt/EBITDA and the interest coverage ratio, which look at whether the company’s debt levels are reasonable compared to the company’s earnings.
Right now, the company’s financial safety is worrying, with a risky Net Debt/EBITDA of 3.9x and a weak interest coverage ratio of 1.18x.
We generally like to see companies with Net Debt/EBITDA below 3x and an interest coverage ratio above 3x. ZIM fails both and has higher financial risk.
The good news is that ZIM’s revenue is expected to grow this year, meaning that the company should, in turn, see higher profits. This would help counteract the currently high debt levels.
Check out ZIM’s full balance sheet analysis >>>
At this point, it’s clear that ZIM has a high risk profile. But at the right price, it could make sense for investors interested in a cyclical play.
Is ZIM a buy?
Today, analysts give ZIM a consensus price target of $17.28. With $ZIM trading around $20 per share, this implies that there’s an 8.6% downside for shares to reach fair value.
These consensus estimates are aggregated by Wall Street’s sell-side analyst estimates, meaning they’re estimates made by real people. Analysts get estimates wrong all the time, but it’s still a fairly reliable place to start to see if a stock might be undervalued.
Over the past 3 years, ZIM has had an average upside of 16.1% based on analysts’ price targets. Therefore, it might be a bad sign that analysts are estimating the stock might have some downside:
You might be wondering:
“Is 2024’s higher expected revenue already factored into the price?”
For this, we’ll look at the company’s NTM EV/Revenue.
What does that mean?
The NTM EV/Revenue multiple looks at a company’s current enterprise value, which is the total capital invested in the business (Market Cap + Total Debt – Cash), and is divided by analysts’ consensus estimates for the company’s next twelve months’ revenue.
Basically, NTM EV/Revenue takes the business’s total value and divides it by expected revenue for the next 12 months. ZIM is trading 25% above its all-time average of 0.7x. This suggests ZIM could be overvalued:
Check out $ZIM’s full valuation analysis >>>
The Takeaway
If you are interested in ZIM, waiting for the stock’s price to fall a bit might be best. 2024’s expected revenue growth may already be factored into the stock’s price.
Additionally, ZIM seems best suited for investors looking for very high-risk investments with a potentially high reward. The waters are murky regarding the kind of results ZIM will see.
If you’re a long-term investor, you might be better off looking for companies that consistently grow revenues and profits with high-quality, stable business models.
The TIKR Terminal offers industry-leading financial data on $ZIM and over 100,000 other stocks.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. We aim to provide informative and engaging analysis to help empower individuals to make their own investment decisions. Neither TIKR nor our authors hold any positions in the stocks mentioned in this article. Thank you for reading, and happy investing!
