Executive Summary / Key Takeaways

• StealthGas Inc. has undergone a profound financial transformation, achieving a debt-free status for its fully owned fleet in July 2025, positioning it for significantly accelerated cash flow accumulation and enhanced financial agility.
• The company consistently delivers strong financial results, reporting record revenues of $47.2 million in Q2 2025 and its second-best quarterly profits ever, building on a third consecutive year of record profitability in 2024.
• StealthGas differentiates itself through a high-quality, Japanese and Korean-built fleet strategically concentrated in the premium European and Mediterranean markets, enabling it to command superior rates amidst stringent regulatory environments.
• Despite its robust financial health and operational performance, the stock trades at a significant discount to net asset value and peers on a price-to-earnings basis, prompting ongoing share repurchase programs.
• While geopolitical risks and a growing order book for Medium Gas Carriers (MGCs) present challenges, a strong period coverage, positive LPG market fundamentals, and strategic focus on ammonia-capable vessels underpin a favorable long-term outlook.

A Strategic Transformation: From Leverage to Liquidity in LPG Shipping

StealthGas Inc., established in Athens, Greece in 2004, has carved a niche in the seaborne transportation of liquefied petroleum gas (LPG) and related products. The company's journey has been marked by strategic evolution, culminating in a significant financial transformation that has reshaped its investment profile. Historically, StealthGas navigated market fluctuations, with revenues reaching approximately $164 million in 2018, though adjusted profits were then minimal, signaling a need for a more disciplined approach. This evolution gained significant momentum in early 2023, as the company embarked on an aggressive deleveraging strategy, a direct response to rising interest rates and improving cash flow generation.

The company's core business involves transporting various petroleum gas products, including propane, butane, and ammonia, across regional and intercontinental routes. Its strategic focus has increasingly shifted towards the European and Mediterranean markets, where over 70% of its fleet was trading by Q2 2025. This repositioning is a direct response to the premium freight rates available West of Suez, driven by a shortage of suitable, well-maintained vessels and stringent European regulations on vessel conditions and safety. StealthGas's foundational strength lies in its commitment to high-quality assets, with the majority of its vessels built in reputable Japanese and Korean yards, a core policy that distinguishes its fleet from older, less compliant tonnage often relegated to less demanding Far Eastern trades. This emphasis on quality, rather than proprietary technology, serves as a critical operational differentiator, enabling the company to meet strict European environmental regulations, such as EU-ETS and FuelEU, which penalize less efficient vessels.

Competitive Edge Through Asset Quality and Market Focus

In the competitive landscape of LPG shipping, StealthGas operates alongside prominent players such as Dorian LPG Ltd. (LPG), Navigator Holdings Ltd. (NVGS), and BW LPG Limited (BWLPG). While some competitors, like Dorian LPG, may possess more modern fleets or exhibit faster adoption of fuel-efficient technologies, StealthGas's competitive advantage is rooted in its high-quality, well-maintained fleet and its strategic market positioning. The company's vessels, primarily built in Japan and Korea, are designed to meet the rigorous standards of European ports and charters. This allows StealthGas to command premium rates in these demanding markets, where a significant portion of the overall pressurized LPG fleet, being over 20 years old, is often deemed unsuitable.

This focus on asset quality and regulatory compliance provides a tangible moat, allowing StealthGas to compete effectively against rivals who may prioritize scale or volume-driven growth. For instance, while Navigator Holdings might have an edge in scale and cost-effectiveness in certain shared markets, StealthGas's strategic adaptability across product types and its ability to operate in highly regulated, premium regions offer a distinct advantage. Furthermore, the company's Handysize and Medium Gas Carrier (MGC) vessels are capable of carrying ammonia, positioning StealthGas to capitalize on the anticipated growth in ammonia trading, which many competitors are also eyeing. However, the company remains cautious about the MGC segment's significant order book, which has surpassed 50% of the existing fleet, viewing new orders at current record prices as a "risk proposition" if ammonia market expectations do not fully materialize.

Financial Fortification and Shareholder Value Creation

StealthGas's financial narrative in recent years is one of remarkable transformation and disciplined capital allocation. The company embarked on an aggressive deleveraging strategy in early 2023, utilizing $154 million for debt repayments that year. This momentum continued into 2024, with an additional $108 million repaid, bringing total debt below $100 million for the first time. By Q1 2025, debt was further reduced by $32 million, making the company net debt-free with a cash balance more than double its remaining debt. The culmination of this strategic objective arrived in July 2025, when StealthGas completed the repayment of all remaining debt on its fully owned fleet, rendering all its vessels unencumbered. Since the beginning of 2023, an impressive $348 million has been used to repay debt, including $86 million in 2025.

This deleveraging has had a profound impact on the company's financial health. Interest costs were significantly reduced to $0.6 million in Q2 2025, with expectations of complete savings on interest costs going forward. The reduction in debt amortization, from $28 million per annum two years ago to just $2.2 million per annum in Q1 2025, allows for significantly faster cash flow accumulation. Management projects an operating cash flow run rate of close to $100 million per annum, providing substantial financial flexibility. As of June 30, 2025, StealthGas maintained strong liquidity with $87.3 million in cash, including restricted cash, and reported an operational cash inflow of $25 million for Q2 2025.

The company's operational performance reflects the success of its strategic initiatives. In Q2 2025, StealthGas reported record revenues of $47.2 million, a 13% increase year-on-year, marking the most successful quarter ever for its fully owned fleet in terms of operations. Adjusted net income for the quarter was $21.7 million, its second-best ever, and income from operations reached a record $19.7 million, a substantial 22% increase compared to the previous year. For the full year 2024, StealthGas achieved its highest-ever revenues of $167.3 million and a record adjusted net profit of $77 million, marking its third consecutive year of record profitability. Adjusted EBITDA for 2024 also reached an all-time high of $108.8 million.

Beyond debt reduction, StealthGas is committed to returning value to shareholders through its share repurchase program. Management has spent approximately $1.8 million on buybacks in 2025 and over $21.2 million since June 2023, viewing it as a sound use of liquidity given the stock's persistent trading discount to net asset value. The company's TTM Price-to-Earnings (P/E) ratio of 4.18 and Price-to-Book (P/B) ratio of 0.38 underscore this undervaluation when compared to peers like Dorian LPG (P/E 28.12, P/B 1.33) and Navigator Holdings (P/E 13.68, P/B 0.97).

Market Dynamics, Outlook, and Identified Risks

The broader LPG market continues to present a favorable backdrop for StealthGas. Global LPG exports registered strong growth of 6.6% in the first six months of 2025, with U.S. exports increasing year-on-year and terminal expansions underway, projected to boost volumes by over 25% by 2028. Middle Eastern exporters are also looking to strengthen production, and OPEC's decision to lift production cuts is expected to increase LPG volumes in the short term. Demand from major importers like China and India remains robust, with China's LPG imports climbing by 6.7% in May 2025 and India's showing strong year-on-year growth. Long-term Chinese demand is underpinned by the expansion of PDH plants, with three more expected in 2025, bringing total capacity to 27 million tons.

StealthGas maintains a visible revenue stream, with period coverage for 2025 exceeding 70% of fleet days, securing over $150 million in future revenues. Management anticipates chartering activity to pick up in the fourth quarter, following seasonally weaker summer months, and remains confident in the positive fundamentals for LPG shipping. The slim order book for Handysize vessels, with no new deliveries scheduled for 2025, is expected to support the period market for this segment.

However, the investment thesis is not without its risks. A significant concern emerged in July 2025 when the LPG carrier Eco Wizard, one of the company's newer vessels, was damaged by explosions in Russia, rendering it off-hire and impacting near-term revenue generation. The situation is complex, and its resolution timeline remains uncertain. Geopolitical volatility, including the Red Sea situation, the Russia-Ukraine conflict, potential Iranian sanctions, and the US-China trade war, continues to create market uncertainty and could affect trade routes and demand. Furthermore, while the ammonia market presents long-term potential, the substantial order book for MGCs, exceeding 50% of the existing fleet, could lead to challenging market conditions and pressure on rates, especially if ammonia demand does not meet expectations. Seeking Alpha also highlights risks such as customer concentration, oil price volatility, and evolving environmental regulations.

Conclusion

StealthGas Inc. stands at a pivotal point in its corporate history, having successfully executed a transformative deleveraging strategy that has rendered its fully owned fleet debt-free. This financial fortification, coupled with a consistent track record of record revenues and profits, positions the company for accelerated cash flow generation and enhanced agility in a dynamic global LPG shipping market. Its strategic focus on high-quality, compliant vessels operating in premium European markets provides a durable competitive advantage, enabling it to command superior rates and navigate stringent regulatory environments.

Despite the inherent volatility of the shipping industry and specific challenges such as the Eco Wizard incident and the MGC order book, StealthGas's disciplined capital allocation, including ongoing share repurchases, underscores management's confidence in the company's intrinsic value. With strong market fundamentals, a visible revenue stream from high period coverage, and strategic positioning for future trends like ammonia trading, StealthGas presents a compelling investment opportunity for discerning investors seeking a financially robust and undervalued player in the specialized LPG transportation sector. The company's journey from a leveraged entity to a debt-free powerhouse, combined with its operational excellence and strategic foresight, suggests a strong potential for continued shareholder value creation.