Critical Review: KNOT Offshore Partners (NYSE:KNOP) & Danaos (NYSE:DAC)

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

Analyst Ratings

This is a summary of recent ratings and price targets for KNOT Offshore Partners and Danaos, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
KNOT Offshore Partners	0	2	0	1	2.67
Danaos	0	0	2	0	3.00

Danaos has a consensus price target of $105.00, indicating a potential upside of 24.00%. Given Danaos’ stronger consensus rating and higher probable upside, analysts plainly believe Danaos is more favorable than KNOT Offshore Partners.

Profitability

This table compares KNOT Offshore Partners and Danaos’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
KNOT Offshore Partners	10.00%	5.58%	1.82%
Danaos	44.62%	13.88%	10.99%

Dividends

KNOT Offshore Partners pays an annual dividend of $0.10 per share and has a dividend yield of 1.2%. Danaos pays an annual dividend of $3.40 per share and has a dividend yield of 4.0%. KNOT Offshore Partners pays out 10.1% of its earnings in the form of a dividend. Danaos pays out 14.0% 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. Danaos is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Valuation & Earnings

This table compares KNOT Offshore Partners and Danaos”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
KNOT Offshore Partners	$318.60 million	0.89	$13.93 million	$0.99	8.35
Danaos	$1.01 billion	1.59	$505.07 million	$24.25	3.49

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

Insider and Institutional Ownership

26.8% of KNOT Offshore Partners shares are owned by institutional investors. Comparatively, 19.0% of Danaos shares are owned by institutional investors. 41.0% of Danaos shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Volatility and Risk

KNOT Offshore Partners has a beta of -0.03, meaning that its share price is 103% less volatile than the S&P 500. Comparatively, Danaos has a beta of 1.45, meaning that its share price is 45% more volatile than the S&P 500.

Summary

Danaos beats KNOT Offshore Partners on 14 of the 18 factors compared between the two stocks.

About KNOT Offshore Partners

KNOT Offshore Partners LP acquires, owns, and operates shuttle tankers under long-term charters in the North Sea and Brazil. The company provides loading, transportation, and discharge of crude oil under time charters and bareboat charters. The company was founded in 2013 and is headquartered in Aberdeen, the United Kingdom.

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.