As Trucking Seems Set To Cool, How Cold Will Old Dominion's Multiple Get?

When I last reviewed Old Dominion (ODFL), I said I didn’t want to pay a near-peak multiple for near-peak earnings, even though I think Old Dominion is the best trucking company out there and one of the best-run companies I’ve followed over the years. The shares subsequently rose another 15% on strong volume, pricing, and cost control, but have since fallen almost 30% from that early September peak and now sits almost 20% lower than when I last wrote about the company.

I love the idea of picking up Old Dominion shares when the Street has bailed out on the less-than-truckload (or LTL) sector, but I’m not sure we're at that point of capitulation yet. Forward multiples have been cut in half in past downturns and we’re not there yet, though I don’t expect 2019 or 2020 to be disastrous. Figuring out the “right” multiple is really difficult right now, but I’d strongly urge readers to keep this stock on a watch list, as you don’t get the opportunity to buy great businesses at reasonable prices all that often, and cyclical sectors like trucking can see some pretty unreasonable valuations at the peaks and troughs.

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As Trucking Seems Set To Cool, How Cold Will Old Dominion's Multiple Get?