Radiant Logistics Applying A Familiar Model To A Fragmented, Growing Sector

The third-party logistics (or 3PL) industry is huge, with some estimates of the addressable opportunity ranging from $160 billion to $190 billion just in the United States. Radiant Logistics (NYSEMKT:RLGT) isn't targeting all of that, or at least not yet, but the company's operations in truck and intermodal brokerage and freight forwarding do cover around one-half to two-thirds of the potential market. Radiant is still a relatively small player in comparison to companies like C.H. Robinson (NASDAQ:CHRW), XPO (NYSEMKT:XPO), Landstar (NASDAQ:LSTR), and Echo (NASDAQ:ECHO), but the company's growth-by-acquisition strategy has been used successfully many times over in this space and its addressable markets remain very fragmented.

At this point, it looks to me like the Street may be too skeptical about Radiant. While there have been recent challenges from soft demand and excess capacity, those circumstances seem to be improving. Uncertainty about U.S. trade policy is another risk factor, as is the possibility that the company will overpay for future acquisitions and/or struggle to integrate them. Recognizing those risks, I still believe there are meaningful opportunities here as the business scales up, and I think the shares look pretty interesting below $6/share.

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Radiant Logistics Applying A Familiar Model To A Fragmented, Growing Sector

Seeking Alpha: XPO Logistics Sticking To An Aggressive Growth Plan

Every time I've written about XPO Logistics (XPO), I've heard from readers who simply do not believe that the company will succeed in its goal of buying or building its way into a leading spot in third-party logistics by 2016. Yet, the company continues to post strong organic growth and negotiate multiple M&A transactions, the latest being the acquisition of Pacer International (PACR).

Whether it's the bull market in general or a buy-in from institutional investors, the shares of XPO Logistics had a good 2013 and sit just below a 52-week high. Even with that strong performance, they don't appear to me to be unreasonably valued today.

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XPO Logistics Sticking To An Aggressive Growth Plan

Seeking Alpha: XPO Logistics Building Credibility In Aggressive Growth Targets

When I last wrote about XPO Logistics (XPO) in March of this year, I found the company's ambitions to be rather remarkable, but potentially very lucrative for shareholders. In the following four or five months, I didn't really second-guess my decision to "watch and wait" as the stock went nowhere fast. Then the company announced its largest-ever acquisition and the stock jumped to new highs before settling down a bit.

Six months later, it's hard not to like XPO Logistics even more. The company's combination of aggressive M&A and organic growth is building credibility that the 2016 target of $4 billion to $6 billion in revenue is attainable, not to mention the 5% EBITDA margin. A great deal could still go wrong between now and then and there are significant uncertainties about what the company's capital structure will look like at that point, but I think shareholders can still find meaningful value in these shares.

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XPO Logistics Building Credibility In Aggressive Growth Targets

Investopedia: J.B. Hunt's Bigger Challenge Today Is Expectations, Not Operations

The markets remind us over and over again that quality stocks often appreciate well beyond fair value, particularly when they become popular picks in attractive sectors. That would seem to be the case at J.B. Hunt (Nasdaq:JBHT), as it is quite difficult to call the stock's price a bargain by conventional means. While the Street's love for J.B. Hunt has been great for shareholders, it does come with a price, as expectations seem to be quite high for this well-run transportation company.

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http://www.investopedia.com/stock-analysis/041213/jb-hunts-bigger-challenge-today-expectations-not-operations-jbht-chrw-lstr-xpo.aspx

Seeking Alpha: XPO Logistics Has Huge Ambitions, But Wall Street Has Real Doubts

It doesn't feel like a stretch to say that Wall Street loves logistics. From FedEx (FDX) to Hub Group (HUBG), from Landstar (LSTR) to JB Hunt (JBHT), most of this sector is trading very close to 52-week highs, even though economic activity in the U.S. has been pretty "meh" recently. While CH Robinson (CHRW) and XPO Logistics (XPO) are a bit further removed from their highs, I think the latter could be a very interesting opportunity even at these levels.

The ambitions of the XPO management team are nothing short of extraordinary - they aim to take a company that sits around the #20 spot in the U.S. truck brokerage with $280 million in revenue and grow it into the #2 player by 2016, with revenue in the range of $4 billion to $6 billion. That's an incredible goal and frankly Wall Street isn't buying it - or at least not showing a willingness to assume that XPO can grow at that rate and generate any sort of real free cash flow. If the Street is wrong and management is right, shareholders could be looking at a future multi-bagger here.

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XPO Logistics Has Huge Ambitions, But Wall Street Has Real Doubts

Investopedia: Hub Group Could Deliver Value, But Mind The Margins

Done right, asset-light transportation/logistics services can be quite lucrative even if the reported free cash flow margins are thin. As one of the larger players in intermodal (and the largest asset-light intermodal company), Hub Group (Nasdaq:HUBG) is taking advantage of the same intermodal growth trends that have been helping rival J.B. Hunt (Nasdaq:JBHT) and boosting the performances of Class 1 railroads such as Union Pacific (NYSE:UNP) and Norfolk Southern (NYSE:NSC). Although Hub Group is vulnerable to a further macroeconomic slowdown and a margin squeeze between rail carriers and customers, there could be worthwhile value in these shares.

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http://www.investopedia.com/stock-analysis/2012/Hub-Group-Could-Deliver-Value-But-Mind-The-Margins-HUBG-JBHT-UNP-CHRW1024.aspx

Investopedia: The Logic Of Logistics Stocks

A great deal of ink is routinely spilled on the virtues of inventing a better mousetrap or finding a better way to make that mousetrap. It is less common, though, to see the same attention given to figuring out better ways to get those mousetraps onto store shelves. While most investors are likely quite familiar with the railroad and trucking industries, and their links with a recovering economy, the same may not be true for those companies that specialize in third-party logistics and serve as intermediaries between the producers and shippers.

To that end, then, it is worth exploring whether the logistics industry is a good investment destination in today's market.

The Industry
As a very simplified explanation, these companies thrive by stepping between shipping customers and shipping providers and making life easier for both. Handling the logistics and shipping can be a major headache for companies, particularly smaller operators, and shippers can charge punishing rates for deliveries that are inconvenient or inefficient for them. On the other hand, transportation companies really do not relish the headaches and hassles of dealing with thousands of customers and having to tend to their specific needs.

Enter the third-party logistics specialists. These companies can not only consolidate shipments and negotiate bulk discounts, but they can handle many of the details that bedevil smaller customers. On the flip side, they offer the large rail, trucking and freight concerns a large consistent customer with a thorough understanding of the business and a minimal need for hand-holding. Producers save money, transporters save money and the companies in between make money.

The Companies 
C H Robinson Worldwide (Nasdaq:CHRW) is the largest domestic truck broker in the U.S., and gets about three-quarters of its revenue from truck brokerage. The company is also looking to expand into the growing international air and ocean freight forwarding business. This should reduce some of the cyclicality of the business.

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http://stocks.investopedia.com/stock-analysis/2011/The-Logic-Of-Logistics-Stocks-CHRW-EXPD-HUBG-LSTR-ECHO-UTIW0107.aspx