Old Dominion Freight Line Inc (ODFL, Financial) has seen a daily gain of 3.41%, and a 3-month gain of 28.58%. With an Earnings Per Share (EPS) of 11.51, the question arises: is the stock modestly overvalued? This article aims to provide a comprehensive valuation analysis of ODFL. Keep reading for an in-depth understanding of the company's financial health and intrinsic value.
Company Overview
Old Dominion Freight Line, the second-largest less than truckload carrier in the United States, operates with more than 250 service centers and over 11,000 tractors. The company stands out in the trucking industry for its discipline and efficiency, leading to superior profitability and capital returns. Its strategic initiatives focus on increasing network density through market share gains and maintaining industry-leading service through consistent infrastructure investment. With a current price of $406.9 per share and a market cap of $44.50 billion, there's a question of whether the stock is trading above its fair value.
Understanding the GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated considering historical trading multiples, a GuruFocus adjustment factor based on past returns and growth, and future business performance estimates. The GF Value Line on our summary page gives an overview of the fair value at which the stock should ideally be traded.
According to GuruFocus Value calculation, the stock of Old Dominion Freight Line appears to be modestly overvalued. This suggests that the long-term return of its stock is likely to be lower than its business growth.
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Assessing Financial Strength
Investing in companies with low financial strength could lead to permanent capital loss. Hence, it's crucial to review a company's financial strength before deciding to buy shares. Old Dominion Freight Line has a cash-to-debt ratio of 0.69, ranking better than 60.22% of 925 companies in the Transportation industry. Based on this, GuruFocus ranks Old Dominion Freight Line's financial strength as 9 out of 10, suggesting a strong balance sheet.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, is less risky. Old Dominion Freight Line has been profitable 10 over the past 10 years. Its operating margin is 28.58%, ranking better than 87.3% of 937 companies in the Transportation industry. Overall, the profitability of Old Dominion Freight Line is ranked 10 out of 10, indicating strong profitability.
Growth is a crucial factor in a company's valuation. A faster-growing company creates more value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth of Old Dominion Freight Line is 17.6%, ranking better than 76.98% of 908 companies in the Transportation industry. The 3-year average EBITDA growth rate is 28%, ranking better than 74.17% of 817 companies in the Transportation industry.
ROIC vs WACC
Return on invested capital (ROIC) and weighted average cost of capital (WACC) are another way to look at a company's profitability. For the past 12 months, Old Dominion Freight Line's ROIC is 29.54, and its WACC is 11.67, indicating a healthy return on invested capital.
Conclusion
In conclusion, the stock of Old Dominion Freight Line appears to be modestly overvalued. The company's financial condition is strong, and its profitability is robust. Its growth ranks better than 74.17% of 817 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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