Thinking About SAIA? Consider This First.

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 (%)
2021-12-31 383 -286 97 24.16
2020-12-31 309 -231 78 627.8
2019-12-31 273 -288 -15 n/a

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 (%)
2021-12-31 2,289 1,837 19.74 26.7
2020-12-31 1,822 1,539 15.58 11.52
2019-12-31 1,787 1,537 13.97 n/a

Saia's Operating Margins

Date Reported Total Revenue ($ MM) Operating Expenses ($ MM) Operating Margins (%) YoY Growth (%)
2021-12-31 2,289 117 14.64 48.03
2020-12-31 1,822 104 9.89 15.81
2019-12-31 1,787 97 8.54 n/a

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:

Holder Shares Date Reported Percentage Value
Price (T.Rowe) Associates Inc 3,489,376 2022-09-29 13% $1,028,772,679
Blackrock Inc. 3,156,182 2022-09-29 12% $930,537,096
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
AllianceBernstein, L.P. 648,561 2022-09-29 2% $191,215,230
Westfield Capital Management Co LP 559,708 2022-09-29 2% $165,018,702
The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.