ArcBest Corp (ARCB, Financial) experienced a daily gain of 8.44% and an Earnings Per Share (EPS) (EPS) of 7.38. However, it also saw a 3-month loss of -7.04%. So, the question arises: is the stock modestly overvalued? This article provides a detailed valuation analysis to answer this question. Read on to gain valuable insights into ArcBest's financial performance and intrinsic value.
About ArcBest Corp (ARCB, Financial)
ArcBest Corp is a logistics company operating in three business segments: Asset-Based, ArcBest, and FleetNet. With a market cap of $2.70 billion and sales of $4.60 billion, ArcBest's stock price stands at $110.89, while its GF Value, an estimation of fair value, is $90.15. This suggests the stock might be modestly overvalued.
Understanding GF Value
The GF Value is a proprietary measure of a stock's intrinsic value. It's calculated based on historical trading multiples, a GuruFocus adjustment factor based on the company's past performance and growth, and future business performance estimates. If ArcBest's 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.
At its current price of $110.89 per share, ArcBest's stock appears to be modestly overvalued. This suggests that the long-term return of its stock is likely to be lower than its business growth.
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ArcBest's Financial Strength
Companies with poor financial strength pose a high risk of permanent capital loss. To avoid this, investors must review a company's financial strength before purchasing shares. ArcBest's cash-to-debt ratio of 0.78 ranks better than 62.39% of 944 companies in the Transportation industry, indicating strong financial strength.
Profitability and Growth
Investing in profitable companies is less risky, especially those with consistent profitability over the long term. ArcBest's profitability is strong, with an operating margin of 4.9%. The company's growth is also impressive, with a 3-year average annual revenue growth rate of 22.7% and an EBITDA growth rate of 47.3%.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can also evaluate its profitability. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC exceeds the WACC, the company is likely creating value for its shareholders. ArcBest's ROIC is 11.15 while its WACC is 12.81.
Conclusion
Overall, ArcBest's stock appears to be modestly overvalued. Despite this, the company's financial condition is strong, and its profitability and growth are impressive. To learn more about ArcBest stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
