It stands to reason that a company that is much more leveraged to trucking spot prices would outperform its peers when those spot prices start to show improvement. It also doesn't hurt when you're an above-average operator in terms of efficiency and margins. Knight Transportation (NYSE:KNX) wears both of those crowns, and the shares have been quite strong in what had been a challenging year for the truckload carrier market prior to the late fall.
There's a lot to like about Knight, as the company challenges Heartland (NASDAQ:HTLD) for the top spot in "clean" operating ratios and it has a long and strong track record of return on invested capital. What's more, the company's diversified customer base and spot rate exposure should serve it very well if/when capacity starts tightening up. The "but" is valuation; Knight's strong metrics and leverage to a recovering trucking market may argue for a premium, but 10x 2017 EBITDA is too rich for my blood at this point.
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Knight Transportation's Leverage To A Trucking Recovery Amply Reflected In The Shares