Why NMM is a low-cost operator with a solid coverage ratio

Coverage ratio

The coverage ratio is defined as a measure of the company’s ability to meet its financial obligations. As a company’s coverage ratio increases, it has the ability to fulfill its obligations to lenders or investors. It can maintain a stable financial position.

Navios Maritime Partners’ (NMM) management commented that based on the normalized nine-month period in 2014, the company’s actual coverage is 1.2x. Going forward, after the container vessel delivery, the company expects that its coverage will be above one times. It added that anything above 1.1x places it in a comfortable position.

The cash coverage ratio assumes some of the company’s equity that’s been issued, but hasn’t been deployed into new vessels.

Efficient, low-cost operator

Supporting its revenue growth, NMM is also benefiting from the economies of scale of sponsor. NMM fixed the operations cost at a low level. The company’s operating expenses are ~25% below the industry levels and ~21% below the industry average of peers like DryShips Inc. (DRYS), Diana Shipping Inc. (DSX), Safe Bulkers Inc. (SB), and Navios Maritime Holdings Inc. (NM). The Guggenheim Shipping ETF (SEA) tracks these shipping companies.