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Why Nordic American Tankers Stock Jumped 21% Yesterday

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Jun. 19 2018, Updated 1:55 p.m. ET

Stock performance

Shares of Nordic American Tankers (NAT) closed at $2.62 on June 18—21.3% higher than the previous day’s closing price. On the same day, its peers Teekay Tankers (TNK), Euronav (EURN), Navios Maritime Midstream Partners (NAP), and Frontline (FRO) rose 9.9%, 5.7%, 2.6%, and 9.3%, respectively.

Nordic American Tankers has seen a year-to-date return of 6.5%. However, in the last year, the stock has lost more than 55% of its value.

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Why the stock jumped

The stock’s jump was a reaction to Nordic American Tankers’ open letter to its shareholders and investors. The letter assured shareholders that NAT’s financial position in the last nine months had changed for the better. The company also foresees improvement in the tanker market. It has reenforced the fact that it doesn’t need to raise debt immediately, so it won’t conduct a bond offering.

Financials

Assurance of NAT’s sound financial position came as a relief for investors, as recently, the company’s financials haven’t been great. In the first quarter of 2018, the company reported a loss of $18.7 million. This was the seventh consecutive quarterly loss for Nordic American Tankers.

NAT’s EBITDA in the first quarter was $3.9 million—a fall of 86.8% year-over-year. The company has debt of $385 million on its balance sheet, and its net debt-to-EBITDA ratio at the end of the first quarter was 86.4x. This ratio tells us that given NAT’s current EBITDA, it will take more than 86 quarters to pay off its debt with its earnings.

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