Analyzing the Fair Valuation of JB Hunt Transport Services Inc (JBHT)
JB Hunt Transport Services Inc (NASDAQ:JBHT) recently reported a daily gain of 1.7% and a three-month gain of 9.46%. The company's Earnings Per Share (EPS) stands at 8.19. The question that arises now is: is the stock fairly valued? This article will delve into an in-depth valuation analysis of JB Hunt Transport Services (NASDAQ:JBHT), offering readers valuable insights into its intrinsic worth. Let's get started.
Introducing JB Hunt Transport Services Inc (NASDAQ:JBHT)
JB Hunt Transport Services ranks among the top surface transportation companies in North America by revenue. The company's primary operating segments include intermodal delivery, dedicated trucking services, for-hire truckload, heavy goods final-mile delivery, and asset-light truck brokerage. The company's stock price currently stands at $193.93, with a market cap of $20 billion. The company's GF Value, an estimate of fair value, is $198.15. This article will delve deeper into the company's value, linking financial assessment with essential company details.
Understanding the GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is calculated based on historical trading multiples, a GuruFocus adjustment factor considering the company's past performance and growth, and future business performance estimates. The GF Value Line on our summary page provides an overview of the fair value at which the stock should be trading. If the stock price is significantly above the GF Value Line, it is overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
JB Hunt Transport Services (NASDAQ:JBHT) gives every indication of being fairly valued based on the GuruFocus Value calculation. At its current price of $193.93 per share, JB Hunt Transport Services has a market cap of $20 billion and the stock gives every indication of being fairly valued. Since JB Hunt Transport Services is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth.
Link: These companies may deliver higher future returns at reduced risk.
Assessing the Financial Strength of JB Hunt Transport Services
Investing in companies with poor financial strength carries a higher risk of permanent loss. Therefore, it is always important to check the financial strength of a company before buying its stock. Looking at the cash-to-debt ratio and interest coverage is a great way to understand the financial strength of a company. JB Hunt Transport Services has a cash-to-debt ratio of 0.21, which is worse than 70.39% of 939 companies in the Transportation industry. The overall financial strength of JB Hunt Transport Services is 8 out of 10, indicating that the financial strength of JB Hunt Transport Services is strong.
Profitability and Growth of JB Hunt Transport Services
Investing in profitable companies, especially those with consistent profitability over the long term, is less risky. A company with high profit margins is usually a safer investment than those with low profit margins. JB Hunt Transport Services has been profitable 10 times over the past 10 years. Over the past twelve months, the company had a revenue of $13.90 billion and an Earnings Per Share (EPS) of $8.19. Its operating margin is 8.61%, which ranks better than 50.69% of 937 companies in the Transportation industry. Overall, the profitability of JB Hunt Transport Services is ranked 9 out of 10, indicating strong profitability.
Growth is one of the most important factors in the valuation of a company. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of JB Hunt Transport Services is 18.5%, which ranks better than 78.38% of 911 companies in the Transportation industry. The 3-year average EBITDA growth is 18.1%, which ranks better than 63.9% of 820 companies in the Transportation industry.
ROIC vs WACC
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, JB Hunt Transport Services's ROIC is 14.81 while its WACC came in at 11.64.
Conclusion
In conclusion, the stock of JB Hunt Transport Services gives every indication of being fairly valued. The company's financial condition is strong, and its profitability is robust. Its growth ranks better than 63.9% of 820 companies in the Transportation industry. To learn more about JB Hunt Transport Services stock, you can check out its 30-Year Financials here.
To find out the high-quality companies that may deliver above-average returns, please check out GuruFocus High Quality Low Capex Screener.
This article first appeared on GuruFocus.
