Standing out among the Street's worst performers today is Old Dominion Freight Line, a integrated freight & logistics company whose shares slumped -3.3% to a price of $181.59, 10.95% below its average analyst target price of $203.91.
The average analyst rating for the stock is hold. ODFL lagged the S&P 500 index by -4.0% so far today and by -32.5% over the last year, returning -9.1%.
Old Dominion Freight Line, Inc. operates as a less-than-truckload motor carrier in the United States and North America. The company belongs to the industrials sector, which generally includes cyclical companies -- with the exception of conglomerates whose business may span several industries. Cyclical companies experience higher sales during periods of economic expanision, and worsening outlooks during recessions.
Old Dominion Freight Line's trailing 12 month P/E ratio is 31.7, based on its trailing EPS of $5.73. The company has a forward P/E ratio of 31.2 according to its forward EPS of $5.9 -- which is an estimate of what its earnings will look like in the next quarter. The P/E ratio is the company's share price divided by its earnings per share. In other words, it represents how much investors are willing to spend for each dollar of the company's earnings (revenues minus the cost of goods sold, taxes, and overhead). As of the third quarter of 2024, the industrials sector has an average P/E ratio of 25.42, and the average for the S&P 500 is 29.3.
To deepen our understanding of the company's finances, we should study the effect of its depreciation and capital expenditures on the company's bottom line. We can see the effect of these additional factors in Old Dominion Freight Line's free cash flow, which was $811.83 Million as of its most recent annual report. Over the last 4 years, the company's average free cash flow has been $652.52 Million and they've been growing at an average rate of 14.7%. With such strong cash flows, the company can not only re-invest in its business, it can afford to offer regular returns to its equity investors in the form of dividends. Over the last 12 months, investors in ODFL have received an annualized dividend yield of 0.5% on their capital.
Another valuation metric for analyzing a stock is its Price to Book (P/B) Ratio, which consists in its share price divided by its book value per share. The book value refers to the present liquidation value of the company, as if it sold all of its assets and paid off all debts). Old dominion freight line's P/B ratio is 9.3 -- in other words, the market value of the company exceeds its book value by a factor of more than 9, so the company's assets may be overvalued compared to the average P/B ratio of the Industrials sector, which stands at 3.2 as of the third quarter of 2024.
Since it has a higher P/E ratio than its sector average, a higher than Average P/B Ratio, and generally positive cash flows with an upwards trend, Old Dominion Freight Line is likely fairly valued at today's prices. The company has mixed growth prospects because of an inflated PEG ratio and strong operating margins with a positive growth rate. We hope you enjoyed this overview of ODFL's fundamentals. Be sure to check the numbers for yourself, especially focusing on their trends over the last few years.
