XPO Logistics (NYSE:XPO)
pursues a business model that isn't going to sit well with every
investor, but it has been a fun story to watch develop, as the shares
are up another 50% or so from the time of my last article and 167% from my first article a little more than two years ago.
In a short span of time XPO has used aggressive-yet-savvy acquisitions
to build itself into a formidable third-party logistics provider with
strong operations across freight brokerage, intermodal, expediting, last
mile, and contract logistics. With the acquisition of Norbert Dentrressangle,
XPO has the opportunity to take an already-successful model and extend
it to Europe while also entering new segments of the logistics market.
The
shares still look undervalued, but there's more than a usual guesswork
that goes into this model. M&A is so critical to the story that I
believe you miss a lot if you only assess the company on the basis of
the operations it owns today. Of course, projecting M&A is tricky as
you have to make a range of assumptions regarding deal size (revenue,
EBITDA, etc.), valuation, financing structures, and so on. My process
gives me a valuation range between $45 and $56, but I tend to think that
$50-$55 is probably a good range to think about for the next 12 months
or so.
Read the full article here:
XPO Logistics Continues To Find New Mountains To Climb
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