Swift Transportation Co. – Value Analysis (NYSE:SWFT) : August 4, 2017

Capitalcube gives Swift Transportation Co. a score of 50.

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

Investment Outlook

Swift Transportation Co. has a fundamental score of 50 and has a relative valuation of OVERVALUED.

Fundamental Score

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Company Overview

  • With respect to peers, relative outperformance over the last year is in contrast to the more recent underperformance.
  • It currently trades at a Price/Book ratio of (2.98).
  • We classify SWFT-US as Harvesting because of the market’s relatively low growth expectations despite its relatively high returns.
  • SWFT-US‘s median net profit margins and relatively high asset efficiency give it some operating leverage.
  • Compared with its chosen peers, changes in the company’s annual earnings are better than the changes in its revenue, implying better than median cost control and/or some economies of scale.
  • SWFT-US‘s return on assets currently and over the past five years is around the peer median and suggest that it does not have any particular operational advantages versus peers.
  • The company’s margins are around the peer medians and do not suggest any benefit from a pricing or an operating cost advantage versus peers.
  • SWFT-US‘s revenues have grown more slowly than the peer median over the last few years, which combined with the stock price’s relatively low P/E ratio suggests substandard growth expectations relative to peers.
  • The company’s capital investment program suggests it is under-investing in a business that is producing peer median returns.
  • SWFT-US has additional debt capacity.

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Leverage & Liquidity

SWFT-US has additional debt capacity.

  • With debt at a reasonable 21.46% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 21.46%), and a well-cushioned interest coverage level of 5.88x, SWFT-US has the capacity to borrow some more.
  • Of the 10 chosen peers for the company, only 7 of the stocks have an outstanding debt balance. Companies with no debt include HTLD-US, KNX-US and MRTN-US.

SWFT-US has maintained its relatively high liquidity profile from the recent year-end.

  • SWFT-US‘s interest coverage is downward trending but is still within one standard deviation above its five-year average interest coverage of 5.26x.
  • The decrease in its interest coverage to 5.88x from 7.34x (in 2016) was also accompanied by a decrease in its peer median during this period to 4.75x from 6.92x.
  • Interest coverage rose 0.72 points relative to peers.
  • SWFT-US‘s debt-EV is its lowest relative to the last five years and compares to a high of 57.90% in 2012.
  • Like the interest coverage trend, the decrease in its debt-EV (to 21.46% from 27.15%) was also accompanied by a decrease in its peer median during this period (to 21.46% from 27.15%).

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Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
USA Truck, Inc. 68.21 1.13 -2.68 12.7
Celadon Group, Inc. 66.03 0.92 0.64 16.2
Heartland Express, Inc. 0 4.05 No interest exp 999
P.A.M. Transportation Services, Inc. 56.7 1.23 2.87 31.55
J.B. Hunt Transport Services, Inc. 8.62 1.49 26.16 90.29
Covenant Transportation Group, Inc. Class A 38.49 1.54 3.62 37.83
Knight Transportation, Inc. 0.68 3.21 263.18 321.7
Universal Logistics Holdings, Inc. 36.82 1.44 3.58 28.61
Werner Enterprises, Inc. 8.54 1.74 42.02 239.02
Marten Transport, Ltd. 1.03 1.48 0 527.22
Swift Transportation Company Class A 21.46 1.45 5.88 34.46
Peer Median 21.46 1.48 4.75 37.83
Best In Class 0.68 4.05 No interest exp 999

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Company Profile

Swift Transportation Co. engages in the provision of transportation solutions. It operates through the following segments: Truckload, Dedicated, Swift Refrigerated, and Intermodal. The Truckload segment consists of one-way movements over irregular routes throughout the United States, Mexico, and Canada. The Dedicated segment offers tailored solutions under long-term contracts. The Swift Refrigerated segment consists of shipments for customers that require temperature-controlled trailers. The Intermodal segment includes revenues generated by moving freight over the rail in the company’s containers and other trailing equipment; and revenues for drayage to transport loads between the railheads and customer locations. The company was founded by Jerry C. Moyes and Carl Moyes in 1966 and is headquartered in Phoenix, AZ.

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