Unveiling C.H. Robinson Worldwide (CHRW)'s Value: Is It Really Priced Right? A Comprehensive Guide
With a daily loss of -2.94% and a 3-month loss of -6.23%, the stocks of C.H. Robinson Worldwide Inc (NASDAQ:CHRW) have been underperforming. The company has an Earnings Per Share (EPS) (EPS) of 4.35, which raises the question: is the stock modestly undervalued? This article aims to provide a comprehensive valuation analysis of C.H. Robinson Worldwide (NASDAQ:CHRW) to answer this question. Let's delve into the details.
A Snapshot of C.H. Robinson Worldwide
C.H. Robinson Worldwide is a top-tier non-asset-based third-party logistics provider with a significant focus on domestic freight brokerage, which constitutes about 60% of its 2022 net revenue. The firm operates a large air and ocean forwarding division (30%) and a European truck-brokerage division, among other services. The company's stock price currently stands at $87.88, while its GF Value, an estimate of fair value, is $97.67. This discrepancy paves the way for a deeper exploration of the company's value.
Understanding the GF Value
The GF Value represents the current intrinsic value of a stock, calculated based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line 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. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
Based on GuruFocus Value calculation, C.H. Robinson Worldwide's stock appears to be modestly undervalued. With a current price of $87.88 per share and a market cap of $10.20 billion, the company's stock is likely to offer higher long-term returns due to its relative undervaluation.
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Financial Strength of C.H. Robinson Worldwide
Investing in companies with poor financial strength can lead to a higher risk of permanent loss of capital. Therefore, it's crucial to review a company's financial strength before deciding to buy its stock. C.H. Robinson Worldwide has a cash-to-debt ratio of 0.1, which is worse than 83.71% of 939 companies in the Transportation industry. GuruFocus ranks the overall financial strength of C.H. Robinson Worldwide at 6 out of 10, indicating fair financial strength.
Profitability and Growth of C.H. Robinson Worldwide
Investing in profitable companies, especially those with consistent profitability over the long term, poses less risk. C.H. Robinson Worldwide has been profitable 10 times over the past 10 years. With a revenue of $20.10 billion and an Earnings Per Share (EPS) of $4.35 in the past twelve months, the company's operating margin is 3.71%. This ranks worse than 68.82% of 943 companies in the Transportation industry. However, GuruFocus ranks the profitability of C.H. Robinson Worldwide at 9 out of 10, indicating strong profitability.
One of the most important factors in the valuation of a company is its growth. 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 81.23% of 911 companies in the Transportation industry. The company's 3-year average EBITDA growth is 18.3%, ranking better than 64.27% of 820 companies in the Transportation industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can help determine its profitability. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, C.H. Robinson Worldwide's ROIC is 15.75, and its cost of capital is 8.48.
Conclusion
In conclusion, the stock of C.H. Robinson Worldwide (NASDAQ:CHRW) gives every indication of being modestly undervalued. The company's financial condition is fair, and its profitability is strong. Its growth ranks better than 64.27% of 820 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.
