Hub Group (HUBG): A Fairly Valued Gem in the Transportation Industry
With a daily gain of 2.54%, a 3-month loss of -2.95%, and an Earnings Per Share (EPS) (EPS) of 8.35, Hub Group Inc (NASDAQ:HUBG) presents an intriguing profile for investors. The question is, is the stock fairly valued? This article provides a comprehensive valuation analysis of Hub Group, offering insights into its financial strength, profitability, and growth prospects. We invite you to delve into our analysis.
A Brief Overview of Hub Group Inc (NASDAQ:HUBG)
Hub Group ranks among the largest providers of rail intermodal service. With about 60% of its revenue coming from intermodal and transportation solutions, the company has established a robust presence in the industry. Its logistics division, which accounts for around 20% of its revenue, offers outsourced transportation management, warehousing and fulfillment, and final mile delivery. Hub Group's current stock price stands at $79.27 per share, with a market cap of $2.50 billion. A comparison with the GF Value, an estimation of the fair value, suggests that the stock is fairly valued.
Understanding the GF Value of Hub Group (NASDAQ:HUBG)
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is calculated based on historical multiples, a GuruFocus adjustment factor, and future estimates of the business performance. The GF Value Line on our summary page provides an overview of the fair value at which the stock should ideally be traded. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher.
According to GuruFocus Value calculation, the stock of Hub Group gives every indication of being fairly valued. The current price of $79.27 per share and the market cap of $2.50 billion align with our estimate of the fair value at which the stock should be traded. As Hub Group is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth.
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Financial Strength of Hub Group
Companies with poor financial strength pose a high risk of permanent capital loss to investors. To avoid this, it's crucial to review a company's financial strength before deciding to purchase shares. Key indicators of financial strength include the cash-to-debt ratio and interest coverage. Hub Group has a cash-to-debt ratio of 0.66, which ranks better than 58.67% of 934 companies in the Transportation industry. The overall financial strength of Hub Group is 8 out of 10, indicating strong financial health.
Profitability and Growth of Hub Group
Investing in profitable companies carries less risk, especially those that have consistently demonstrated profitability over the long term. Hub Group has been profitable for 10 years over the past 10 years. During the past 12 months, the company had revenues of $4.80 billion and Earnings Per Share (EPS) of $8.35. Its operating margin of 7.4% is worse than 52.49% of 945 companies in the Transportation industry. Overall, GuruFocus ranks Hub Group's profitability as strong.
Growth is a critical factor in the valuation of a company. A faster-growing company creates more value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth of Hub Group is 13.3%, which ranks better than 69.09% of 909 companies in the Transportation industry. The 3-year average EBITDA growth rate is 32.1%, which ranks better than 77.85% of 817 companies in the Transportation industry.
ROIC vs WACC Analysis
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) is a useful way to evaluate its profitability. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC exceeds the WACC, the company is likely creating value for its shareholders. During the past 12 months, Hub Group's ROIC was 14.2 while its WACC came in at 9.49.
Conclusion
In conclusion, the stock of Hub Group (NASDAQ:HUBG) gives every indication of being fairly valued. The company's financial condition is strong and its profitability is robust. Its growth ranks better than 77.85% of 817 companies in the Transportation industry. To learn more about Hub Group stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
