Old Dominion Freight Line (ODFL)'s True Worth: A Complete Analysis of Its Market Value
Old Dominion Freight Line Inc (NASDAQ:ODFL) experienced a daily loss of 2.11% and a three-month gain of 27.01%. The company's Earnings Per Share (EPS) stands at 11.51. The question we seek to answer is: Is the stock modestly overvalued? This article provides an in-depth valuation analysis of ODFL, offering valuable insights for potential investors. We encourage you to read on to uncover the intrinsic value of this stock.
Company Overview
Old Dominion Freight Line is the second-largest less than truckload carrier in the United States. With over 250 service centers and 11,000-plus tractors, it has established itself as one of the most disciplined and efficient providers in the trucking industry. The company's strategic initiatives revolve around increasing network density through market share gains and maintaining industry-leading service via steadfast infrastructure investment. Comparing the stock price of $406.98 to the GF Value of $331.83, it appears that ODFL is modestly overvalued.
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, and future business performance estimates. If the stock price is significantly above the GF Value Line, it is considered overvalued, and its future return is likely to be poor. Conversely, if it is significantly below, its future return will likely be higher.
According to our calculations, Old Dominion Freight Line's stock appears to be modestly overvalued with a market cap of $44.50 billion. Therefore, the long-term return of its stock is likely to be lower than its business growth.
These companies may deliver higher future returns at reduced risk.
Financial Strength of Old Dominion Freight Line
Companies with poor financial strength offer investors a high risk of permanent capital loss. To avoid this, it's crucial to review a company's financial strength before purchasing shares. Old Dominion Freight Line has a cash-to-debt ratio of 0.69, which ranks better than 59.45% of 937 companies in the Transportation industry. The overall financial strength of Old Dominion Freight Line is 9 out of 10, indicating strong financial health.
Profitability and Growth
Investing in profitable companies poses less risk, especially those demonstrating consistent profitability over the long term. Old Dominion Freight Line, with its high profit margins and a record of profitability over the past ten years, is a safer investment. The company's operating margin of 28.58% ranks better than 87.17% of 935 companies in the Transportation industry. Furthermore, Old Dominion Freight Line's 3-year average annual revenue growth rate is 17.6%, ranking better than 76.79% of 909 companies in the industry.
ROIC vs. WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can provide insights into its profitability. Old Dominion Freight Line's ROIC of 29.54 exceeds its WACC of 11.59, indicating that the company is creating value for its shareholders.
Conclusion
In conclusion, the stock of Old Dominion Freight Line is believed to be modestly overvalued. The company's strong financial condition, profitability, and growth rank it better than 73.72% of 818 companies in the Transportation industry. For more details about Old Dominion Freight Line stock, you can check out its 30-Year Financials here.
To find high-quality companies that may deliver above-average returns, please check out the GuruFocus High Quality Low Capex Screener.
This article first appeared on GuruFocus.
