Unveiling C.H. Robinson Worldwide (CHRW)'s Value: Is It Really Priced Right? A Comprehensive Guide
C.H. Robinson Worldwide Inc (NASDAQ:CHRW) experienced a slight dip of -2.15% in its daily stock value, and a 3-month loss of -1.58%. Despite these fluctuations, the company boasts a solid Earnings Per Share (EPS) of 4.35. But is the stock fairly valued? This article aims to answer this question through a detailed valuation analysis of C.H. Robinson Worldwide. We invite investors and potential GuruFocus.com members to delve into this comprehensive assessment.
An Overview of C.H. Robinson Worldwide Inc (NASDAQ:CHRW)
C.H. Robinson Worldwide is a top-tier, non-asset-based third-party logistics provider. The company focuses significantly on domestic freight brokerage, which constitutes about 60% of its 2022 net revenue. This includes truck brokerage and rail intermodal. The company also operates a large air and ocean forwarding division, which has grown organically and through tuck-in acquisitions over the years. The remainder of the company's revenue comes from its European truck-brokerage division, transportation management services, and a legacy produce-sourcing operation.
Comparing the current stock price of $92 to its GF Value of $98.52, we see that the stock appears to be fairly valued. Below is the income breakdown of C.H. Robinson Worldwide:
Understanding the GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. The GF Value Line on our summary page provides an overview of the fair value that the stock should ideally be traded at. It is calculated based on three factors:
Historical multiples (PE Ratio, PS Ratio, PB Ratio, and Price-to-Free-Cash-Flow) that the stock has traded at.
A GuruFocus adjustment factor based on the company's past returns and growth.
Future estimates of the business performance.
We believe the GF Value Line is the fair value that the stock should be traded at. The stock price will most likely fluctuate around the GF Value Line. 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.
The stock of C.H. Robinson Worldwide shows every sign of being fairly valued based on GuruFocus' valuation method. GF Value estimates the stock's fair value based on three key factors: historical multiples, an internal adjustment based on the company's past business growth, and analyst estimates of future business performance. If the share price is significantly above the GF Value Line, the stock may be overvalued and have poor future returns. On the other hand, if the share price is significantly below the GF Value calculation, the stock may be undervalued and have higher future returns. At its current price of $ 92 per share, C.H. Robinson Worldwide stock shows every sign of being fairly valued.
Because C.H. Robinson Worldwide 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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Assessing the Financial Strength of C.H. Robinson Worldwide (NASDAQ:CHRW)
Investing in companies with poor financial strength carries a higher risk of permanent loss. Looking at the cash-to-debt ratio and interest coverage is a great way to understand the financial strength of a company. C.H. Robinson Worldwide has a cash-to-debt ratio of 0.1, which is worse than 84.85% of 937 companies in the Transportation industry. The overall financial strength of C.H. Robinson Worldwide is 6 out of 10, which indicates that the financial strength of C.H. Robinson Worldwide is fair. Below is the debt and cash of C.H. Robinson Worldwide over the past years:
Profitability and Growth of C.H. Robinson Worldwide (NASDAQ:CHRW)
Companies that have been consistently profitable over the long term offer less risk for investors who may want to purchase shares. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. C.H. Robinson Worldwide has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $20.10 billion and Earnings Per Share (EPS) of $4.35. Its operating margin is 3.71%, which ranks worse than 68.52% of 937 companies in the Transportation industry. Overall, the profitability of C.H. Robinson Worldwide is ranked 9 out of 10, which indicates strong profitability.
One of the most important factors in the valuation of a company is growth. Long-term stock performance is closely correlated with growth according to GuruFocus research. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of C.H. Robinson Worldwide is 20.4%, which ranks better than 81.3% of 909 companies in the Transportation industry. The 3-year average EBITDA growth is 18.3%, which ranks better than 64.18% of 818 companies in the Transportation industry.
Evaluating Profitability: 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, C.H. Robinson Worldwide's ROIC is 15.75 while its WACC came in at 8.24. Below is the historical ROIC vs WACC comparison of C.H. Robinson Worldwide:
Final Thoughts
In summary, the stock of C.H. Robinson Worldwide (NASDAQ:CHRW) shows every sign of being fairly valued. The company's financial condition is fair, and its profitability is strong. Its growth ranks better than 64.18% of 818 companies in the Transportation industry. To learn more about C.H. Robinson Worldwide stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
