Costamare Inc. (NYSE:CMRE) has surfaced as a potential candidate for investors seeking a blend of growth and value, following a screen based on the time-tested approach outlined by legendary fund manager Peter Lynch. In his book One Up on Wall Street, Lynch advocated for a long-term, buy-and-hold strategy centered on finding growing companies trading at reasonable valuations. By favoring businesses with sustainable earnings growth, solid financial health, and a cheap price tag, this method leans on value-investing logic while still allowing for expansion. It’s a style often called Growth at a Reasonable Price (GARP), and the criteria used in this screen—past earnings growth between 15% and 30%, a PEG ratio under 1, low debt, strong profitability, and adequate liquidity—are designed to flag such names. After the recent market turbulence, with the S&P500’s long-term and short-term trends both positive, CMRE stands out as an interesting stock to examine closer.

Meeting the Peter Lynch Criteria

Costamare operates in the Marine Transportation industry, chartering a sizable fleet of containerships and dry bulk vessels. When we apply Lynch’s rules, the company checks several important boxes:

• Earnings Growth (EPS 5-Year): 22.29% – This fits squarely within Lynch’s preferred range of 15% to 30%. The idea here is that companies growing too fast (over 30%) often stumble, while those below 15% may lack the momentum to sustain a long-term uptrend. CMRE’s 22.29% growth signals a company that expanded at a healthy, sustainable clip, not one chasing unsustainable hype.
• PEG Ratio (based on 5-year EPS growth): 0.24 – Lynch famously insisted on a PEG ratio below 1, which means the stock is cheap relative to its earnings growth. CMRE’s PEG of 0.24 is well under that threshold, suggesting investors are paying very little for each unit of past growth. This is a core GARP signal: you get growth without the premium price.
• Debt/Equity Ratio: 0.60 – Lynch was wary of high debt, often preferring a D/E under 0.25. While CMRE’s 0.60 is a bit above that ideal, it still keeps leverage in check and falls within the screen’s cap of 0.6. For a capital-intensive shipping company, this level is manageable and indicates the company isn’t overly reliant on borrowed money.
• Current Ratio: 1.73 – A ratio above 1.0 means the company has more than enough current assets to cover its short-term liabilities. CMRE’s 1.73 provides a solid buffer, which matters for a company in a cyclical industry where cash flow can ebb and flow.
• Return on Equity (ROE): 16.47% – Lynch wanted ROE above 15% to ensure the business generates solid profits on shareholder equity. CMRE’s 16.47% clears that hurdle comfortably, confirming that the company is translating its assets into earnings efficiently.

Fundamental Report Summary

Based on a detailed analysis comparing Costamare against 35 peers in the Marine Transportation industry, the company earns a fundamental rating of 6 out of 10. While not perfect, the report reveals a clear strengths-and-weaknesses profile that aligns with GARP principles:

• Profitability (Score: 8/10): Costamare shines here. It has been profitable for each of the past five years, with strong return metrics. Its Return on Equity (16.47%) and Return on Invested Capital (10.11%) both outperform over 88% of industry peers. Profit margins are also strong, with a net margin of 31.21%.
• Valuation (Score: 8/10): This is where the stock gets interesting. The P/E ratio sits at just 5.41, which is far cheaper than the S&P500 average of 26.63 and the industry average of 23.48. The forward P/E of 5.84 also suggests the market expects continued cheapness. Even the Price/Free Cash Flow ratio is in the top percentile of the industry, indicating the stock is undervalued.
• Growth (Score: 3/10): This is the weak spot. While past EPS growth was stellar at 22.29% annually over five years, future expectations are negative—analysts project EPS will decline by 10.82% per year going forward. Revenue is also expected to drop by about 10% annually. This is a caution flag for Lynch-style investors, since the strategy relies on sustained, moderate growth. However, the cheap valuation may partially compensate for that.
• Financial Health (Score: 5/10): The Altman-Z score of 1.69 falls into a distressed range, raising concerns about bankruptcy risk. However, the company's Debt to Free Cash Flow ratio of 3.19 is strong, meaning it could pay off all debt in just over three years using free cash. The balance sheet shows mixed signals, but the liquidity ratios (Current and Quick) are adequate.

Dividend Considerations

For income-focused investors, CMRE offers a dividend yield of 2.68%, which is above the S&P500 average of 1.82%. The payout ratio is a sustainable 23.07%, suggesting the dividend is well-covered by earnings. However, the dividend has decreased over the last three years, so while the yield is decent, it’s not a source of consistent growth.

Analyst Views and Future Outlook

The market expects a significant slowdown in earnings and revenue growth, which helps explain the cheap valuation. In a GARP framework, a stock like CMRE could be a contrarian bet: if the pessimistic forecasts prove too harsh, the low price offers a margin of safety. On the other hand, if the slowdown materializes as predicted, the stock may remain undervalued for a while. The shipping industry is notoriously cyclical, and Costamare’s charter contracts provide some revenue visibility, but the sector faces headwinds from global trade fluctuations.

Conclusion and Further Screening

Costamare Inc. meets several key Peter Lynch criteria, particularly on valuation, profitability, and past growth. Its extremely low PEG ratio and high ROE make it a textbook GARP candidate on paper. However, investors must weigh the expected decline in future earnings and the moderate financial health flags against the cheap price.

For those wanting to explore more stocks that fit this strategy, the same screen used to find CMRE is available here: Peter Lynch Strategy Screener. The full fundamental breakdown can be reviewed in detail at CMRE Fundamental Analysis.

Disclaimer: This article is for informational and educational purposes only and does not constitute investment advice. Always conduct your own research and consult a qualified financial advisor before making any investment decisions.

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