Heartland Express Inc (HTLD, Financial) has been making waves in the stock market, with a daily gain of 3.3% and an Earnings Per Share (EPS) of $0.77. However, over the past three months, the stock has seen a loss of 5.36%. This raises the question: is Heartland Express (HTLD) significantly undervalued? In this article, we delve into a comprehensive valuation analysis to answer this question. Read on to discover the intrinsic value of Heartland Express (HTLD).
Introduction to Heartland Express
Heartland Express Inc is a leading provider of truckload services across the United States and Canada. The company primarily offers asset-based transportation services in the dry van truckload market and temperature-controlled transportation services. Its major customers represent the consumer goods, appliances, food products, and automotive industries. Despite its current stock price of $15.35, the GF Value, a measure of fair value, stands at $32.26. This discrepancy prompts a deeper evaluation of the company's value.
Understanding the GF Value
The GF Value is a proprietary measure of the intrinsic value of a stock. It's calculated based on historical trading multiples, a GuruFocus adjustment factor based on past returns and growth, and future business performance estimates. The GF Value Line provides an overview of the fair value at which the stock should ideally be traded. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. Conversely, if the stock price is significantly below the GF Value Line, its future return will likely be higher.
For Heartland Express (HTLD, Financial), the stock is estimated to be significantly undervalued, according to the GuruFocus Value calculation. At its current price of $15.35 per share and a market cap of $1.20 billion, the future return of Heartland Express stock is likely to be much higher than its business growth due to its significant undervaluation.
Evaluating Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. Therefore, a careful review of a company's financial strength is crucial before deciding to buy shares. Heartland Express has a cash-to-debt ratio of 0.13, which ranks worse than 80.34% of 936 companies in the Transportation industry. Based on this, GuruFocus ranks Heartland Express's financial strength as 6 out of 10, suggesting a fair balance sheet.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, is less risky. Heartland Express has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $1.30 billion and Earnings Per Share (EPS) of $0.77. Its operating margin is 5.87%, which ranks worse than 59.14% of 935 companies in the Transportation industry. Overall, the profitability of Heartland Express is ranked 8 out of 10, indicating strong profitability.
Growth is a crucial factor in the valuation of a company. The 3-year average annual revenue growth rate of Heartland Express is 19%, which ranks better than 78.96% of 908 companies in the Transportation industry. The 3-year average EBITDA growth rate is 18.9%, which ranks better than 64.5% of 817 companies in the Transportation industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can also evaluate a company's profitability. Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the return on invested capital exceeds the weighted average cost of capital, the company is likely creating value for its shareholders. During the past 12 months, Heartland Express's ROIC is 4.01 while its WACC came in at 7.47.
Conclusion
In summary, the stock of Heartland Express (HTLD, Financial) is estimated to be significantly undervalued. The company's financial condition is fair, and its profitability is strong. Its growth ranks better than 64.5% of 817 companies in the Transportation industry. To learn more about Heartland Express stock, you can check out its 30-Year Financials here.
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