Hub Group, Inc. (HUBG): A Bear Case Theory 

We came across a bearish thesis on Hub Group, Inc. on Quality Value Investing’s Substack by David J. Waldron. In this article, we will summarize the bulls’ thesis on HUBG. Hub Group, Inc.’s share was trading at $39.43 as of December 1st. HUBG’s trailing and forward P/E were 22.17 and 18.02 respectively according to Yahoo Finance.

Hub Group, Inc. (NASDAQ: HUBG), a small-cap player in the intermodal freight and logistics industry, provides an extensive range of transportation and logistics services across North America, including intermodal, truckload, LTL, dedicated, and international transport, as well as warehousing and fulfillment solutions. Added to QVI Real-Time Stock Picks in May 2023 at a cost basis of $37.13, the company remains the second-largest intermodal marketing company in the industry, behind JB Hunt, and holds a narrow moat according to Morningstar.

Despite a strong market position and diversified service offering, Hub Group’s financial performance has underwhelmed relative to benchmarks. Its trailing five-year annualized revenue growth was in the low single digits—well below the S&P 500’s +16%—while the most recent twelve-month revenue fell 5.4% versus the market’s +18.8%. Profitability has also lagged, with low gross margins translating into modest net profit margins, far below the S&P 500 median of +23.2%.

Return on equity and return on invested capital have both fallen short of QVI’s thresholds and peer medians, with ROIC failing to exceed the company’s cost of capital, signaling inefficiencies in capital deployment. Although a $250 million share repurchase program was announced in late 2023, only a small fraction has been executed, limiting its impact on shareholder returns.

Furthermore, owners’ earnings—defined as EPS and dividend growth or, alternatively, free cash flow growth—have remained stuck in the low single digits over the past five years. Given these weak fundamentals, QVI maintains a bearish rating on Hub Group.

Previously we covered a bullish thesis on Old Dominion Freight Line, Inc. (ODFL) by Richard Toad in October 2024, which highlighted its pricing power and strong ROIC in the LTL market. The stock has depreciated approximately by 28.80% since our coverage as the thesis has not yet played out. The thesis still stands. David J. Waldron shares a contrarian and cautious view through his Hub Group coverage.

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Disclosure: None.