StealthGas: 35% Selloff Prior To Q2 Earnings Makes Them A Compelling Buy

Company Overview - StealthGas, Inc. is a Greek-based company operating a fleet of LPG carriers, generating revenue through time charters and voyage charters, with time charter revenues at $124.1 million, voyage charter revenues at $18.3 million, and other income at $1.2 million [2] - The fleet consists of 27 fully owned vessels and 5 additional vessels under joint ventures, with the CEO, Harry N. Vafias, holding a significant stake in the company [3] - The company has not paid dividends since 2009, favoring reinvestment of free cash flow into operations or cash reserves [3] Recent Performance - StealthGas reported a record-breaking Q1 2024 with a 5% year-over-year increase in net income, totaling $17.7 million [4] - Despite reducing fleet size from 32 vessels in Q1 2023 to 27 vessels in Q1 2024 (a 16% reduction), total net voyage revenues increased by 14% year-over-year [5] - Fleet utilization improved from 98.9% in Q1 2023 to 99.1% in Q1 2024, driven by increased demand in the LPG shipping market, particularly from China (27% increase in imports) and India [6] Financial Overview - Total revenue increased from $38.1 million in Q1 2023 to $41.6 million in Q1 2024, a 9.19% increase, while net voyage revenue rose from $34.0 million to $38.7 million, a 13.82% increase [7] - Other revenue declined by 29% from $4.1 million to $2.9 million, primarily due to a reduction in equity earnings from $8.8 million to $2.6 million, attributed to the absence of net vessel sales in Q1 2024 [6][7] Outlook - The company is focused on fleet optimization by replacing older vessels with newer ones that have greater capacity, and diversifying into ammonia shipping, which is gaining recognition as a future fuel [8] - Significant debt reduction plans of $32 million in Q1 2024 and $53.3 million in Q2 2024 will lower interest expenses and improve margins, with 23 vessels free from debt [8] - Recent share buybacks of $3.9 million in 2023 and about $400k in Q1 2024 indicate confidence in the company's financial health [9] Trading View - The share price has dropped by 35% since June 2024, which may reflect investor anticipation of weaker results, potentially already priced in [9] - The company reported negative free cash flow of $72 million in Q2 2024 due to investments in fleet modernization, which is viewed positively as a long-term strategy [9]