One of the pleasures of following XPO Logistics (XPO)
has been listening to the various and sundry comment section prophets
of doom call for XPO's imminent collapse - back at $30, $50, $75, and so
on. There have most definitely been some big corrections along the way,
but management has demonstrated that not only can it assemble a
high-quality broad-ranging freight and logistics franchise but also run
it well. A debt-rich balance sheet, economic sensitivity, and a desire
for more deals are all risk factors to varying degrees, but XPO has
carved out strong positions in areas like truck brokerage, forwarding,
less-than-truckload (or LTL) trucking, last mile logistics, and contract
logistics.
Valuation is a much more significant
issue for me now, though. Even if XPO Logistics can grow at a pace
similar to what companies like Old Dominion (ODFL), J.B. Hunt (JBHT), Hub Group (HUBG), and C.H. Robinson (CHRW)
have managed and push FCF margins into the mid-single-digits, the
implied returns aren't that impressive, and the shares are likewise not
all that cheap on a forward EV/EBTIDA business compared to a blended
multiple based upon its end-market exposures.
Click here for more:
XPO Logistics Leveraging A Hot Freight And Logistics Market
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