Expeditors International of Washington: An Undervalued Gem in the Transportation Industry?
Despite a daily loss of 3.85% and a modest 3-month gain of 3.7%, the Earnings Per Share (EPS) (EPS) of Expeditors International of Washington Inc (NASDAQ:EXPD) stands strong at 7.64. This article aims to answer a crucial question: Is the stock modestly undervalued? Read on for a comprehensive valuation analysis of the company.
Company Overview
Expeditors International of Washington is a non-asset-based third-party logistics provider, primarily focused on international freight forwarding. The firm employs sophisticated IT systems and contracts with airlines and ocean carriers to move customers' freight across the globe. With over 200 full-service office locations worldwide, Expeditors International of Washington derived 34% of consolidated net revenue from airfreight, 30% from ocean freight, and 36% from customs brokerage and other services in 2022. The company's stock price currently stands at $120, with a market cap of $18.30 billion.
Understanding GF Value
The GF Value is a proprietary measure of a stock's intrinsic value, computed considering historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. 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. The GF Value of Expeditors International of Washington is $133.03, indicating that the stock is modestly undervalued.
Financial Strength
Assessing the financial strength of a company is crucial before investing. Companies with poor financial strength pose a higher risk of permanent loss. The cash-to-debt ratio and interest coverage are great indicators of a company's financial strength. Expeditors International of Washington has a cash-to-debt ratio of 4.52, ranking better than 86.76% of companies in the Transportation industry. This indicates strong financial strength.
Profitability and Growth
Consistent profitability over the long term offers less risk for investors. Expeditors International of Washington has been profitable 10 out of the past 10 years. The company had a revenue of $15 billion and an EPS of $7.64 over the past twelve months. Its operating margin is 10.92%, which ranks better than 59.77% of companies in the Transportation industry. The average annual revenue growth of Expeditors International of Washington is 31.6%, ranking better than 89.99% of companies in the Transportation industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) and the weighted cost of capital (WACC) provides insight into its profitability. The ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. The WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. Expeditors International of Washington's ROIC is 50.82, and its WACC is 10.54, indicating a healthy profitability.
Conclusion
In conclusion, the stock of Expeditors International of Washington (NASDAQ:EXPD) is believed to be modestly undervalued. The company's financial condition is strong, and its profitability is robust. Its growth ranks better than 79.51% of companies in the Transportation industry. To learn more about Expeditors International of Washington stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
