Old Dominion Freight Line Inc (ODFL, Financial) has recently exhibited a daily gain of 2.75%, yet over the last three months, it has seen a decline of 4.06%. With an Earnings Per Share (EPS) of $11.24, the question arises: Is the stock modestly overvalued? This article delves into a valuation analysis of Old Dominion Freight Line, inviting readers to explore the financial nuances that determine its true market value.
Company Overview
Old Dominion Freight Line is a leading force in the United States' less-than-truckload carrier industry, boasting over 250 service centers and more than 11,000 tractors. Renowned for its disciplined and efficient service, the company's profitability and capital returns are unmatched by its peers. With a strategic focus on increasing network density and maintaining superior service through consistent infrastructure investment, Old Dominion Freight Line stands out as a model of success in the trucking sector.
When assessing Old Dominion Freight Line's stock price of $393.05 against the GF Value of $342.22, it's crucial to determine whether this discrepancy suggests an overvaluation. The following analysis provides a comprehensive examination of the company's financial health and intrinsic value.
The Essence of GF Value
The GF Value is an exclusive metric that pinpoints the intrinsic value of a stock by considering historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and projections of future business performance. This value serves as a benchmark for the stock's fair trading value.
Old Dominion Freight Line (ODFL, Financial) appears modestly overvalued according to the GF Value. The stock's current price of $393.05, when compared to the GF Value, indicates that investors may experience lower future returns relative to the company's business growth. This assessment is crucial for long-term investors aiming to align their portfolio with the company's true valuation.
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Financial Strength Assessment
Investors should scrutinize a company's financial strength to avoid potential capital loss. Key indicators such as the cash-to-debt ratio and interest coverage offer insights into the company's financial resilience. Old Dominion Freight Line's cash-to-debt ratio of 2.58 is commendable, ranking higher than 81.9% of its industry peers. With a financial strength rating of 10 out of 10 from GuruFocus, the company's balance sheet is robust.
Profitability and Growth Perspectives
Long-term profitability is a key indicator of lower investment risk. Old Dominion Freight Line has maintained profitability for the past decade, with an impressive operating margin of 28.14%, outperforming 87.7% of the transportation industry. This stellar profitability is reflected in a 10 out of 10 ranking.
Growth is a vital valuation factor, as it is closely linked to long-term stock performance. Old Dominion Freight Line's average annual revenue growth of 17.6% over three years surpasses 76.66% of its industry counterparts. Moreover, its EBITDA growth rate of 28% ranks favorably against 73.57% of transportation companies, underscoring its growth potential.
ROIC vs. WACC Analysis
Comparing Return on Invested Capital (ROIC) to the Weighted Average Cost of Capital (WACC) provides another perspective on profitability. Old Dominion Freight Line's ROIC of 27.6 significantly exceeds its WACC of 11.43, indicating value creation for shareholders. This relationship is a strong testament to the company's effective capital allocation.
Conclusive Insights
Ultimately, Old Dominion Freight Line (ODFL, Financial) appears to be modestly overvalued. However, its financial condition and profitability are robust, with growth rates that are commendable within the transportation industry. For a deeper understanding of Old Dominion Freight Line's financial journey, 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.
