Shares of Saia (SAIA) slid 0.4 % during today's afternoon session, which brings their 52 week performance to 3.5%. The Market Inference outlook on this stock is that it is overvalued at today's price of $294.83. But we also believe that a value analysis should be complemented by an overview of the company's strong growth indicators and negative market sentiment.
Saia, Inc., through its subsidiaries, operates as a transportation company in North America. The mid-cap Industrials company has 11,600 full time employees and is based in Johns Creek, United States.
SAIA's P/E Ratio Is Comparable to its Sector Average
Compared to the Industrials sector's average of 20.49, Saia has a trailing twelve month price to earnings (P/E) ratio of 20.5 and an expected P/E ratio of 21.0. P/E ratios are calculated by dividing the company's share price by either its trailing 12 month ($14.4) or forward earnings per share ($14.01).
Earnings is another term for the net profits left over after subtracting cost of goods sold, taxes, and operating costs from the company's recorded sales revenue. One way of looking at the P/E ratio is that it represents how much investors are willing to pay for every dollar's worth of the company's earnings. Since Saia's P/E ratio is near its sector average of 20.49, we can deduce that the market is fairly valuing the company's earnings.
Saia Is Fairly Valued in Terms of Expected Growth
Another factor pointing to Saia's value is its PEG ratio of 1.76. This is the stock's price to earnings ratio divided by its estimated earnings growth rate. If the resulting ratio is near or lower than 1 — but higher than 0 — its indicates that the company is faitly valued in terms of expected growth.
SAIA Has an Alarming P/B Ratio
The price to book (P/B) ratio of a company is a comparison of the company's market capitalization versus its net asset, or book value. A ratio lower than 1 tells you that the equity market is undervaluing the book value of the company's assets, and ratios higher than 1 tell you that the equity markets are overvaluing the company in terms of its assets.
Of course, a company is worth much more than its assets alone, so the focus on P/B ratio is mainly to enable investors to single out undervalued securities that offer a margin of safety. Since Saia's P/B ratio of 5.2 is higher than its sector average of 3.78, such a margin of safety does not exist for the stock.
SAIA's Weak Cash Flow Generation Is Troubling
The table below shows that Saia is not generating enough cash. A well run company will generally have cash flows that reflect the strength of its underlying business, and in Saia's case, free cash flow is growing at an average rate of 326.0% with a coefficient of variability of 112.0%. We can also see that cash flows from operations are evolving at a 18.5% rate, versus 2.0%:
|Date Reported||Cash Flow from Operations ($ MM)||Capital expenditures ($ MM)||Free Cash Flow ($ MM)||YoY Growth (%)|
Saia's Margins Are Strong
If you buy a stock for the long run, you want the underlying business model to be profitable. Gross margins tell you how much profit the company generates compared to the cost of revenue, which is the cost directly related to providing Saia's goods and services. Operating margins, on the other hand, tell you how much of these profits the company keeps after you take overhead into account.
Saia's Gross Margins
|Date Reported||Revenue ($ MM)||Cost of Revenue ($ MM)||Gross Margins (%)||YoY Growth (%)|
Saia's Operating Margins
|Date Reported||Total Revenue ($ MM)||Operating Expenses ($ MM)||Operating Margins (%)||YoY Growth (%)|
Saia's cost of revenue is growing at a rate of 9.7% in contrast to 9.6% for operating expenses. Sales revenues, on the other hand, have experienced a 13.8% growth rate. As a result, the average gross margins growth is 19.1 and the average operating margins growth rate is 31.9, with coefficients of variability of 18.1% and 29.1% respectively.
We See Negative Market Signals Regarding SAIA
At today's price of $294.83 per share, Saia is 1.81% away from its target price of $289.6, and on average, analysts give the stock a rating of hold.16.1% of the company's shares are linked to short positions, and 114.0% of the shares are owned by institutional investors:
|Price (T.Rowe) Associates Inc||3,489,376||2022-09-29||13%||$1,028,772,679|
|Capital International Investors||2,741,586||2022-09-29||10%||$808,301,763|
|Vanguard Group, Inc. (The)||2,653,334||2022-09-29||10%||$782,282,427|
|State Street Corporation||883,003||2022-09-29||3%||$260,335,762|
|Capital World Investors||766,740||2022-09-29||3%||$226,057,943|
|Wasatch Advisors Inc||694,033||2022-09-29||3%||$204,621,740|
|Dimensional Fund Advisors LP||649,633||2022-09-29||2%||$191,531,288|
|Westfield Capital Management Co LP||559,708||2022-09-29||2%||$165,018,702|