Old Dominion Freight Line Inc (ODFL, Financial) has recently experienced a daily loss of -2.83% and a 3-month decline of -6.83%. Despite these fluctuations, the company boasts an impressive Earnings Per Share (EPS) of 11.24. Investors are now faced with a critical question: Is Old Dominion Freight Line modestly overvalued? To address this query, a thorough valuation analysis is essential. Read on as we delve into the financial intricacies of Old Dominion Freight Line to determine its true market value.
Company Overview
Old Dominion Freight Line Inc (ODFL, Financial) stands as the second-largest less-than-truckload carrier in the United States, with a vast network of over 250 service centers and more than 11,000 tractors. Renowned for its operational discipline and efficiency, the company's profitability and capital returns are unmatched in the trucking industry. Strategic initiatives focus on boosting network density through market share gains and sustaining top-tier service through consistent infrastructure investment. The stock currently trades at $387.38 per share with a market cap of $40.90 billion, while the GF Value estimates its fair value at $342.03. This discrepancy sets the stage for an in-depth examination of Old Dominion Freight Line's valuation.
Understanding the GF Value
The GF Value is a unique metric that estimates the intrinsic value of a stock based on historical trading multiples, a GuruFocus adjustment factor reflecting past performance and growth, and projected future business performance. Ideally, the stock price should gravitate around the GF Value Line. If a stock's price significantly exceeds the GF Value Line, it may be overvalued, potentially leading to lower future returns. Conversely, a price well below the GF Value Line could indicate a stock with higher future returns. According to GuruFocus, Old Dominion Freight Line (ODFL, Financial) appears modestly overvalued, suggesting a potential for lower long-term returns compared to its business growth.
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Financial Strength
Before investing in a company, assessing its financial strength is crucial as it can help mitigate the risk of permanent loss. Old Dominion Freight Line's cash-to-debt ratio of 2.58 surpasses 82.35% of its peers in the Transportation industry. With a financial strength rating of 10 out of 10, Old Dominion Freight Line's monetary health is robust, indicating a strong foundation for current and potential investors.
Profitability and Growth
Investing in consistently profitable companies over the long term generally presents less risk. Old Dominion Freight Line has maintained profitability for the past decade, with a revenue of $5.90 billion and an Earnings Per Share (EPS) of $11.24 over the last twelve months. Its operating margin of 28.14% ranks higher than 87.66% of the companies in the Transportation industry. The company's profitability score is a solid 10 out of 10. Growth is also a vital aspect of valuation, and Old Dominion Freight Line's 3-year average revenue growth rate outperforms 76.5% of competitors in the Transportation sector. Its 3-year average EBITDA growth rate of 28% ranks well within the industry, indicating a strong growth trajectory.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) with its Weighted Average Cost of Capital (WACC) can reveal its value creation efficiency. Old Dominion Freight Line's ROIC of 27.6 is significantly higher than its WACC of 11.87, indicating the company's effective generation of cash flow relative to the capital invested.
Conclusion
In summary, although Old Dominion Freight Line (ODFL, Financial) is considered modestly overvalued, the company's financial condition and profitability are robust, with growth rates surpassing many within the Transportation industry. For a more detailed financial analysis, investors can explore Old Dominion Freight Line's 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
