Covenant Transportation Group, Inc. – Value Analysis (NASDAQ:CVTI) : April 25, 2017

Capitalcube gives Covenant Transportation Group, Inc. a score of 28.

Our analysis is based on comparing Covenant Transportation Group, Inc. with the following peers – P.A.M. Transportation Services, Inc., USA Truck, Inc., Universal Logistics Holdings, Inc., Celadon Group, Inc., Marten Transport, Ltd., Swift Transportation Company Class A, Knight Transportation, Inc., Heartland Express, Inc., Werner Enterprises, Inc. and Roadrunner Transportation Systems, Inc. (PTSI-US, USAK-US, ULH-US, CGI-US, MRTN-US, SWFT-US, KNX-US, HTLD-US, WERN-US and RRTS-US).

Investment Outlook

Covenant Transportation Group, Inc. has a fundamental score of 28 and has a relative valuation of UNDERVALUED.

Fundamental Score

Access our research and ratings on Covenant Transportation Group, Inc.

Company Overview

  • From a peer analysis perspective, relative outperformance last month is up from a median performance last year.
  • It trades at a lower Price/Book multiple (1.35) than its peer median (1.82).
  • The market expects CVTI-US‘s earnings to grow at about the same rate as its chosen peers and also does not seem to expect much improvement in its below peer median returns.
  • CVTI-US has relatively low profit margins and median asset efficiency.
  • Compared with its chosen peers, the company’s annual revenues and earnings change at a slower rate, implying a lack of strategic focus and/or lack of execution success.
  • CVTI-US‘s return on assets currently and over the past five years has trailed the peer median and suggests the company might be operationally challenged relative to its peers.
  • The company’s median gross margin and relatively low pre-tax margin suggest high operating costs versus peers.
  • While CVTI-US‘s revenues growth has been below the peer median in the last few years, the market still gives the stock a P/E ratio that is around peer median and seems to see the company as a long-term strategic bet.
  • The company is likely overinvesting in a business with only median returns.
  • CVTI-US might have enough interest coverage to take-on additional debt prudently.

Access our research and ratings on Covenant Transportation Group, Inc.

Leverage & Liquidity

CVTI-US might have enough interest coverage to take-on additional debt.

  • While CVTI-US‘s debt to enterprise ratio of 38.49% is on the high side compared to an overall benchmark of 25% (Note: The peer median is currently 36.82%), it also enjoys a relatively high interest coverage level of 4.57x which may give the company enough financial strength to support additional debt. Thus, the company is classified as having Some Capacity to raise more debt.
  • Of the 10 chosen peers for the company, only 8 of the stocks have an outstanding debt balance. Companies with no debt include MRTN-US and HTLD-US.

CVTI-US has maintained its Some Capacity profile from the recent year-end.

  • CVTI-US‘s interest coverage is downward trending and is now similar to its five-year average interest coverage of 4.63x.
  • The decrease in its interest coverage to 4.57x from 6.51x (in 2016) was also accompanied by a decrease in its peer median during this period to 5.10x from 6.07x.
  • Interest coverage fell 0.97 points relative to peers (and is now lower than its peer median).
  • CVTI-US‘s debt-EV is less than (but within one standard deviation of) its five-year average debt-EV of 50.72%.
  • Compared to 2016, debt-EV has remained relatively stable for both the company (38.49%) and the peer median (36.82%).

Access the detailed analysis for Covenant Transportation Group, Inc.

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
P.A.M. Transportation Services, Inc. 56.7 1.23 4.18 31.55
USA Truck, Inc. 67.27 1.27 -0.17 21.16
Universal Logistics Holdings, Inc. 36.82 1.44 5.64 28.61
Celadon Group, Inc. 66.03 0.92 0.64 16.2
Marten Transport, Ltd. 1.03 1.54 0 527.22
Swift Transportation Company Class A 27.15 1.43 6.43 32.58
Knight Transportation, Inc. 0.68 2.42 159.26 321.7
Heartland Express, Inc. 0 3.24 No interest exp 999
Werner Enterprises, Inc. 8.54 1.79 38.35 239.02
Roadrunner Transportation Systems, Inc. 57.31 0.64 2.43 18.23
Covenant Transportation Group, Inc. Class A 38.49 1.54 4.57 37.83
Peer Median 36.82 1.44 5.1 32.58
Best In Class 0.68 3.24 No interest exp 999

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Company Profile

Covenant Transportation Group, Inc. is a holding company, which engages in the provision of freight and logistics services. Its truckload business is comprised of the following services: expedited haul, dedicated, temperature-controlled and regional solo-driver service; long haul, regional, dedicated and intermodal temperature controlled service; and regional solo-driver and dedicated services in the southeastern U.S. The company was founded by David Ray Parker in 1985 and is headquartered in Chattanooga, TN.


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