Will the latest Stealthgas volatility spike frighten retail investors?

It seems Stealthgas will continue to recover much faster as its share price surged up 0.65% today. The entity current daily volatility is 6.08 percent, with a beta of 1.27 and an alpha of 0.4 over DOW. As many investors are getting excited about transportation, it is fair to sum up Stealthgas. I will address the reasons why this entity does not get much respect from retail investors under the current market uncertainty.
Published over a year ago
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Reviewed by Michael Smolkin

Stealthgas currently holds roughly 70.37 M in cash with 45.23 M of positive cash flow from operations. This results in cash-per-share (CPS) ratio of 1.86. The company currently holds 302.4 M in liabilities with Debt to Equity (D/E) ratio of 0.63, which is about average as compared to similar companies. Stealthgas has a current ratio of 1.47, which is within standard range for the sector. Debt can assist Stealthgas until it has trouble settling it off, either with new capital or with free cash flow. So, Stealthgas' shareholders could walk away with nothing if the company can't fulfill its legal obligations to repay debt. However, a more frequent occurrence is when companies like Stealthgas sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Stealthgas to invest in growth at high rates of return. When we think about Stealthgas' use of debt, we should always consider it together with cash and equity.
Investing in StealthGas, just like investing in any other equity instrument, is characterized by a strong risk-return correlation. High risks mean high returns and low risk means lower expected returns. Risk management is the act of identifying and assessing the potential risk and developing strategies to minimize these risks and earn maximum possible profits while holding StealthGas along with other instruments in the same portfolio. Using conventional technical analysis and fundamental analysis to select individual securities into a portfolio complements risk management and adds value to overall investors' investing strategies.
Sophisticated investors, who have witnessed many market ups and downs, anticipate that the market will even out over time. This tendency of StealthGas' price to converge to an average value over time is called mean reversion. However, historically, high market prices usually discourage investors that believe in mean reversion to invest, while low prices are viewed as an opportunity to buy.
Please note, it is not enough to conduct a financial or market analysis of a single entity such as StealthGas. Your research has to be compared to or analyzed against StealthGas' peers to derive any actionable benefits. When done correctly, StealthGas' competitive analysis will give you plenty of quantitative and qualitative data to validate your investment decisions or develop an entirely new strategy toward taking a position in StealthGas.

How important is StealthGas's Liquidity

StealthGas financial leverage refers to using borrowed capital as a funding source to finance StealthGas ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. StealthGas financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Financial leverage can amplify the potential profits to StealthGas' owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of StealthGas' financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets). Please check the breakdown between StealthGas's total debt and its cash.

StealthGas Correlation with Peers

Investors in StealthGas can reduce exposure to individual asset risk by holding a diversified portfolio of assets in addition to a long position in StealthGas. Diversification will allow for the same portfolio return with reduced risk. The correlation table of StealthGas and its peers is a two-dimensional matrix that shows the correlation coefficient between pairs of securities StealthGas is related in some way. The cells in the table are color-coded to highlight significantly positive and negative relationships. Each cell shows the correlation between one pair of equities and can be used to run pair trading strategies or create efficient portfolios with your current brokerage. Please check volatility of StealthGas for more details

Another Deeper Perspective

Stealthgas appears to be very risky, given 3 months investment horizon. Stealthgas owns Efficiency Ratio (i.e., Sharpe Ratio) of 0.0678, which indicates the firm had 0.0678% of return per unit of risk over the last 3 months. Our standpoint towards measuring the volatility of a stock is to use all available market data together with stock-specific technical indicators that cannot be diversified away. We have found twenty-eight technical indicators for Stealthgas, which you can use to evaluate the future volatility of the company. Please review Stealthgas' Semi Deviation of 5.82, coefficient of variation of 1200.08, and Risk Adjusted Performance of 0.1056 to confirm if our risk estimates are consistent with your expectations.

Possible September recoup of Stealthgas?

Variance is down to 36.16. It may connote a possible volatility fall. Stealthgas is displaying above-average volatility over the selected time horizon. Investors should scrutinize Stealthgas independently to ensure intended market timing strategies are aligned with expectations about Stealthgas volatility. Understanding different market volatility trends often help investors to time the market. Properly using volatility indicators enable traders to measure Stealthgas' stock risk against market volatility during both bullish and bearish trends. The higher level of volatility that comes with bear markets can directly impact Stealthgas' stock price while adding stress to investors as they watch their shares' value plummet. This usually forces investors to rebalance their portfolios by buying different stocks as prices fall.

The Current Takeaway on Stealthgas Investment

While other entities under the marine shipping industry are still a bit expensive, Stealthgas may offer a potential longer-term growth to retail investors. While some retail investors may not share our view we believe that the current risk-reward utility is not appealing enough to do any trading. Please use our equity advice module to run different scenarios to ensure your current risk level and investment horizon are fully reflective of your current investing preferences in regards to Stealthgas.

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Editorial Staff

This story should be regarded as informational only and should not be considered a solicitation to sell or buy any financial products. Macroaxis does not express any opinion as to the present or future value of any investments referred to in this post. This post may not be reproduced without the consent of Macroaxis LLC. Macroaxis LLC and Vlad Skutelnik do not own shares of StealthGas. Please refer to our Terms of Use for any information regarding our disclosure principles.

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