Critical Comparison: Danaos (NYSE:DAC) versus Teekay Tankers (NYSE:TNK)

Danaos (NYSE:DAC) and Teekay Tankers (NYSE:TNK) are both mid-cap transportation companies, but which is the better business? We will contrast the two businesses based on the strength of their valuation, analyst recommendations, earnings, profitability, institutional ownership, dividends and risk.

Dividends

Danaos pays an annual dividend of $3.60 per share and has a dividend yield of 2.7%. Teekay Tankers pays an annual dividend of $1.00 per share and has a dividend yield of 1.3%. Danaos pays out 12.7% of its earnings in the form of a dividend. Teekay Tankers pays out 8.1% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Danaos has increased its dividend for 3 consecutive years and Teekay Tankers has increased its dividend for 2 consecutive years. Danaos is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Institutional and Insider Ownership

19.0% of Danaos shares are held by institutional investors. Comparatively, 52.7% of Teekay Tankers shares are held by institutional investors. 41.0% of Danaos shares are held by insiders. Comparatively, 1.9% of Teekay Tankers shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Volatility & Risk

Danaos has a beta of 0.9, indicating that its share price is 10% less volatile than the S&P 500. Comparatively, Teekay Tankers has a beta of -0.21, indicating that its share price is 121% less volatile than the S&P 500.

Profitability

This table compares Danaos and Teekay Tankers’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Danaos	49.85%	13.18%	10.23%
Teekay Tankers	42.60%	16.34%	14.87%

Earnings and Valuation

This table compares Danaos and Teekay Tankers”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Danaos	$1.04 billion	2.32	$494.61 million	$28.35	4.69
Teekay Tankers	$951.80 million	2.82	$351.19 million	$12.30	6.32

Danaos has higher revenue and earnings than Teekay Tankers. Danaos is trading at a lower price-to-earnings ratio than Teekay Tankers, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of current recommendations and price targets for Danaos and Teekay Tankers, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Danaos	0	1	2	1	3.00
Teekay Tankers	1	3	3	1	2.50

Danaos presently has a consensus price target of $105.00, indicating a potential downside of 21.00%. Teekay Tankers has a consensus price target of $77.00, indicating a potential downside of 0.90%. Given Teekay Tankers’ higher probable upside, analysts clearly believe Teekay Tankers is more favorable than Danaos.

Summary

Danaos beats Teekay Tankers on 9 of the 17 factors compared between the two stocks.

About Danaos

Danaos Corporation, together with its subsidiaries, provides container and drybulk vessels services in Australia, Asia, and Europe. The company offers seaborne transportation services by operating vessels in the containership and drybulk sectors of the shipping industry. As of April 03, 2024, it had a fleet of 68 containerships aggregating 421,293 twenty-foot equivalent units in capacity. The company was formerly known as Danaos Holdings Limited and changed its name to Danaos Corporation in October 2005. Danaos Corporation was founded in 1963 and is based in Piraeus, Greece.

About Teekay Tankers

Teekay Tankers Ltd. provides crude oil and other marine transportation services to oil industries in Bermuda and internationally. The company offers voyage and time charter services; offshore ship-to-ship transfer services of commodities primarily crude oil and refined oil products; and tanker commercial and technical management services. It also engages management of vessels, procurement, and equipment rental businesses. Teekay Tankers Ltd. was incorporated in 2007 and is headquartered in Hamilton, Bermuda.