I can't fault for Hub Group's (NASDAQ:HUBG) growth strategy, as the company has used acquisitions and execution to build itself to mid-teens share of the domestic intermodal market and a top-five position in the domestic truck brokerage sector. I'm not worried about the growth potential in intermodal, as I think the market is only about 25% penetrated, but I would like to see the company make more progress on profitability as margins have slipped, free cash flow has become erratic, and recent trends in ROIC aren't so favorable.
I don't see anything unfixable about Hub Group, but the shares have enjoyed a good run since the election (up about one-third) and the valuation already seems to incorporate expectations for lower corporate taxes and increased economic activity. As is too often the case, then, this looks more like a "consider on a pullback" idea today, though I suppose more momentum-inclined investors may feel differently given the recent earnings report and the prospect of more clarity on pro-business policies from the new administration.
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Hub Group Grabbing Share, But Backfilling The Margins Is Important