Forward Air Corporation (NASDAQ:FWRD), a US$1.88b small-cap, is a logistics company operating in an industry which has recently been a benefactor of the rise in e-commerce activities across the world. Transport analysts are forecasting for the whole industry, a strong double-digit growth of 14.7% in the upcoming year , and an enormous growth of 60.0% over the next couple of years. This rate is larger than the growth rate of the US stock market as a whole. Below, I will examine the sector growth prospects, as well as evaluate whether Forward Air is lagging or leading in the industry.
What’s the catalyst for Forward Air’s sector growth?
The fall in fuel prices positively impacted freighting companies, who saw higher margins as a result of lower cost. Over the past year, the industry saw growth in the thirties, beating the US market growth of 14.2%. Forward Air leads the pack with its impressive earnings growth of 61.4% over the past year. However, analysts are not expecting this industry-beating trend to continue, with future growth expected to be 0.4% compared to the wider logistics sector growth hovering in the teens next year. As a future industry laggard in growth, Forward Air may be a cheaper stock relative to its peers.
Is Forward Air and the sector relatively cheap?
Air freight companies are typically trading at a PE of 17.97x, relatively similar to the rest of the US stock market PE of 18.29x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. Furthermore, the industry returned a similar 12.5% on equities compared to the market’s 11.4%. On the stock-level, Forward Air is trading at a PE ratio of 19.83x, which is relatively in-line with the average logistics stock. In terms of returns, Forward Air generated 17.6% in the past year, which is 5.1% over the logistics sector.
If Forward Air has been on your watchlist for a while, now may not be the best time to enter into the stock. The company is a logistics industry laggard in terms of its future growth outlook, and is trading relatively in-line with its peers. If growth and mispricing are important aspects for your investment thesis, there may be better investments in the transportation sector. However, before you make a decision on the stock, I suggest you look at Forward Air’s fundamentals in order to build a holistic investment thesis.
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Historical Track Record: What has FWRD’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Forward Air? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.