Tuesday, June 30, 2015

Seeking Alpha: XPO Logistics Continues To Find New Mountains To Climb

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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