The stock of Expeditors International of Washington (NAS:EXPD, 30-year Financials) is believed to be fairly valued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $126.12 per share and the market cap of $21.3 billion, Expeditors International of Washington stock appears to be fairly valued. GF Value for Expeditors International of Washington is shown in the chart below.
Because Expeditors International of Washington is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth, which averaged 15.8% over the past three years and is estimated to grow 8.30% annually over the next three to five years.
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It is always important to check the financial strength of a company before buying its stock. Investing in companies with poor financial strength have a higher risk of permanent loss. Looking at the cash-to-debt ratio and interest coverage is a great way to understand the financial strength of a company. Expeditors International of Washington has a cash-to-debt ratio of 4.03, which is better than 88% of the companies in Transportation industry. The overall financial strength of Expeditors International of Washington is 7 out of 10, which indicates that the financial strength of Expeditors International of Washington is fair. This is the debt and cash of Expeditors International of Washington over the past years:
Companies that have been consistently profitable over the long term offer less risk for investors who may want to purchase shares. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. Expeditors International of Washington has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $11.6 billion and earnings of $5.04 a share. Its operating margin is 10.08%, which ranks better than 71% of the companies in Transportation industry. Overall, the profitability of Expeditors International of Washington is ranked 9 out of 10, which indicates strong profitability. This is the revenue and net income of Expeditors International of Washington over the past years:
Growth is probably one of the most important factors in the valuation of a company. GuruFocus’ research has found that growth is closely correlated with the long-term performance of a company’s stock. If a company’s business is growing, the company usually creates value for its shareholders, especially if the growth is profitable. Likewise, if a company's revenue and earnings are declining, the value of the company will decrease. Expeditors International of Washington’s 3-year average revenue growth rate is better than 91% of the companies in Transportation industry. Expeditors International of Washington’s 3-year average EBITDA growth rate is 12.3%, which ranks better than 71% of the companies in Transportation industry.
One can also evaluate a company’s profitability by comparing its return on invested capital (ROIC) to its weighted average cost of capital (WACC). 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, Expeditors International of Washington’s ROIC is 48.84 while its WACC came in at 6.11. The historical ROIC vs WACC comparison of Expeditors International of Washington is shown below:
In conclusion, Expeditors International of Washington (NAS:EXPD, 30-year Financials) stock shows every sign of being fairly valued. The company's financial condition is fair and its profitability is strong. Its growth ranks better than 71% of the companies in Transportation industry. To learn more about Expeditors International of Washington stock, you can check out its 30-year Financials here.
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