Old Dominion Freight Line Inc (ODFL, Financial), with a current price of $418.58, has gained 5.87% in a day. Its Earnings Per Share (EPS) stands at $12.16. The question that arises for investors is whether the stock, with a GF Value of $333.37, is modestly overvalued. This article aims to answer this question through a comprehensive valuation analysis. Keep reading to gain valuable insights into Old Dominion Freight Line's intrinsic value.
Company Overview
Old Dominion Freight Line is the second-largest less than truckload carrier in the U.S., boasting over 250 service centers and 11,000+ tractors. The company is renowned for its discipline and efficiency in the trucking industry. Its profitability and capital returns are superior to its peers. Strategic initiatives focus on increasing network density through market share gains and maintaining industry-leading service through consistent infrastructure investment.
Understanding the GF Value
The GF Value is a proprietary measure of a stock's intrinsic value. It is calculated based on historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line provides an ideal fair trading value for the stock.
When the stock price is significantly above the GF Value Line, it's considered overvalued, indicating potentially poor future returns. Conversely, if the stock price is significantly below the GF Value Line, it's deemed undervalued, suggesting potentially high future returns.
GF Value Analysis of Old Dominion Freight Line
According to GuruFocus' valuation method, Old Dominion Freight Line is modestly overvalued. The stock's fair value is determined by historical multiples, an internal adjustment based on past business growth, and future business performance estimates. With a market cap of $45.9 billion, the stock's current price of $418.58 per share is considered above its fair value.
Since Old Dominion Freight Line is relatively overvalued, the long-term return of its stock is likely to be lower than its business growth.
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Financial Strength
Investing in companies with robust financial strength minimizes the risk of permanent capital loss. Old Dominion Freight Line's cash-to-debt ratio of 2.33 ranks better than 79.81% of companies in the Transportation industry. This strong financial position indicates a low risk for investors.
Profitability and Growth
Old Dominion Freight Line has been profitable for 10 of the past 10 years, with revenues of $6.2 billion and an EPS of $12.16 over the past 12 months. Its operating margin of 29.3% is better than 86.94% of companies in the Transportation industry, indicating strong profitability.
The company's average annual revenue growth is 17.6%, ranking better than 77.04% of companies in the Transportation industry. The 3-year average EBITDA growth is 28%, which is also higher than 74.39% of companies in the industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) is a reliable way to evaluate its profitability. Old Dominion Freight Line's ROIC of 32.8% significantly exceeds its WACC of 11.13%, indicating value creation for shareholders.
Conclusion
In conclusion, the stock of Old Dominion Freight Line is believed to be modestly overvalued. Despite this, the company exhibits strong financial condition and profitability. Its growth ranks better than 74.39% of companies in the Transportation industry. To learn more about Old Dominion Freight Line stock, you can check out its 30-Year Financials here.
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