Is Quality Distribution cheap now?
At $9.10 per share, Quality Distribution, Inc. (NASDAQ:QLTY) is worth $242.5 million on the market. The market values the company at around 8.6 times EV/EBITDA. Compared to its peers Celadon Group, Inc. (NYSE:CGI) and J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT), its EV multiple is in the middle of the road. Celadon is trading at around $19.50 per share, with a total market cap of $445.30 million. It seems to be the cheapest valued among the three, at only 6.6 times EV/EBITDA. The company has been expanding its business internationally via acquisitions. Recently, Celadon Trucking Services, a Celadon subsidiary, acquired the Canadian truckload carrier, Hyndman Transport Limited, which owned around 175 tractors and has had around $48 million in revenue. President and CEO Paul Will said,
We believe this acquisition offers solid potential to expand our domestic Canada footprint and advance our overall growth plans by delivering growth in our dry van, cross border transportation service offering.
JB Hunt Transport Services seems to be the most expensive of the trio. At $73.40 per share, JB Hunt is worth around $8.7 billion on the market. The market values JB Hunt quite expensively at around 12 times EV/EBITDA. Wal-Mart Stores, Inc. (NYSE:WMT), the famous low cost retailer, likes JB Hunt services a lot. A year ago, JB Hunt was chosen to be Wal-Mart Intermodal Carrier of the Year.
Investors might like JB Hunt the most with its consistent increasing dividends since 2004. Its dividend increased from $0.05 per share in 2004 to $0.71 per share in 2012. It pays the highest dividend yield among the three. However, the dividend yield is quite small, at only 0.8%. Celadon ranked second with 0.4% dividend yield, while Quality Distribution doesn’t pay any dividend yet.
My Foolish take
With the largest truck network in North America, Quality Distribution, Inc. (NASDAQ:QLTY) seems to enjoy the economy of scales in its operations. Barron’s thought that it was cheap, at only 6.4 times 2014 estimated EBITDA with a juicy 18% free cash flow yield. However, its share price performance could experience significant upside only if it reduces the debt level, which could drive its earnings upward in the near future. I would rather wait for better fundamental performance before initiating a long position in this stock.
Anh HOANG has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.
The article Is This Chemical Transportation Business a Good Purchase? originally appeared on Fool.com.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
