ArcBest Corp (ARCB, Financial) recently experienced a notable daily loss of -9.44%, yet it maintains a 3-month gain of 6.71%. With an Earnings Per Share (EPS) of 7.38, investors are keen to understand whether the current market valuation is justified or if the stock is modestly overvalued. This article delves into a detailed valuation analysis to explore ArcBest's market position and future prospects.
Company Introduction
ArcBest Corp is a prominent player in the logistics industry, operating through three business segments: Asset-Based, ArcBest, and FleetNet. With a diverse range of services, the company's financial performance is a critical factor for investors. Currently, ArcBest's stock is trading at $112.96, with a market cap of $2.70 billion, juxtaposed against a GF Value of $99.54, suggesting a potential overvaluation. This section will compare the stock price with its intrinsic value to provide a clearer picture of the company's financial standing.
Summarize GF Value
The GF Value is a unique measure that assesses the intrinsic value of a stock, taking into account historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. According to this method, ArcBest (ARCB, Financial) is considered modestly overvalued. The GF Value Line serves as a benchmark, indicating a fair trading value for the stock. Significant deviation from this line can signal overvaluation or undervaluation, influencing the expected future returns of the stock.
ArcBest's current price suggests that it may be modestly overvalued, which could potentially lead to lower long-term returns compared to the company's business growth. Investors should consider this when evaluating the stock's future prospects.
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Financial Strength
When considering an investment, the financial strength of a company is paramount. ArcBest's financial strength is evident through its cash-to-debt ratio of 0.76, ranking favorably within the Transportation industry. GuruFocus awards ArcBest a strong financial strength score of 8 out of 10, reflecting a robust balance sheet that can weather economic fluctuations.
Profitability and Growth
Consistent profitability is a hallmark of a less risky investment. ArcBest has maintained profitability for the past decade, with a 12-month revenue of $4.80 billion and an Earnings Per Share (EPS) of $7.38. However, its operating margin of 3.75% is an area for improvement. Still, the company's overall profitability is ranked 8 out of 10, which is quite commendable.
Growth is also a critical factor in valuation. ArcBest's average annual revenue growth of 22.7% is impressive, outpacing much of the Transportation industry. Furthermore, its 3-year average EBITDA growth rate of 47.3% is a testament to the company's strong growth trajectory.
ROIC vs. WACC
Comparing a company's Return on Invested Capital (ROIC) with its Weighted Average Cost of Capital (WACC) provides insight into its value creation efficiency. ArcBest's ROIC of 8.2 is currently below its WACC of 10.88, indicating a challenge in generating sufficient returns on investments. Investors should monitor this metric to assess the company's profitability and potential for long-term value creation.
Conclusion
In conclusion, ArcBest (ARCB, Financial) appears to be modestly overvalued based on current assessments. Despite this, the company boasts a strong financial condition and robust profitability. Its growth outperforms a significant portion of its industry peers. For a more in-depth look at ArcBest's financials, investors can explore its 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.
