If you need to move something by sea, look no further than International Shipholding (NYSE:ISH). The multi-purpose shipping company owns 40 vessels to accommodate its clients many needs. Founded in 1947 by Niels F. Johnsen and his two sons, the family still owns 24% of the company and is very much in control. I'll look at why you should own this micro cap.

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Enterprise Value/EBITDA
A quick scan I like to do when first researching a stock is to find out the enterprise value to EBITDA. For me, it's a much better indication of value than price to earnings because it also takes into account the debt and cash positions. In the case of International Shipholding, its enterprise value in the trailing 12 months is 4.6 times EBITDA. That's lower than all four of its peer group. That doesn't necessarily mean it's a sure thing, but it sure helps. Interestingly, if you'd invested $100 in ISH's stock in 2004, at the end of 2009 it was worth $231.65, compared to $102.08 for the S&P 500 and $95.15 for its peer group. Read on and I'll explain why you haven't missed the boat.



Market Cap

International Shipholding (NYSE:ISH)



Overseas Shipholding Group (NYSE:OSG)



Diana Shipping (NYSE:DSX)



Alexander & Baldwin (NYSE:ALEX)



Eagle Bulk Shipping (Nasdaq:EGLE)



The Future Looks Promising
How can this be when there is a severe oversupply of vessels keeping freight prices at depressed levels? I won't speak for other companies, but International Shipholding's diversified business model seems to better insulate it from shipping industry woes that have been ongoing for the past two years. That doesn't mean it doesn't have its own issues to deal with. In the third quarter, its rail/ferry service made a $25.4 million non-cash impairment charge because of management's belief that future revenues would be much less than originally thought. Fortunately, this segment represents a small percentage of its overall revenues.

A majority comes from time charter contracts where the charterer pays voyage expenses such as fuel. In 2009, its time charter contracts delivered a gross voyage profit of $60.0 million on $330.1 million in revenue. A 20% gross margin might not seem like much in the retail business, but in shipping, it's more than fine. Happy with its future prospects, the company filed a $200 million shelf registration in the third quarter just in case a worthwhile business opportunity presents itself. This family plans ahead.

Bottom Line
Because of the impairment, International Shipholding's earnings per share will be considerably lower in 2010. However, that won't stop it from paying out a $1.50 dividend, which thanks to a 13% drop in its stock price in 2010, is yielding almost 6%. It's time to get on board. (For additional reading, see The Baltic Dry Index: Evaluating An Economic Recovery.)

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Tickers in this Article: ISH, OSG, DSX, ALEX, EGLE

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