[1] Market Valuation: At P/EBIT of 32.0, ODFL stock is more expensive per dollar of operating profit compared to 17.2 for CSX
Market ValuationCSXOld Dominion Freight Linevs Old Dominion Freight LineAs of 11/23/2021 Price To Sales Ratio (P/S)6.88.3CheaperPrice To OpInc Ratio (P/EBIT)17.232CheaperPrice To Earnings Ratio (PE)22.543.1Cheaper
[2] Growth & Profits: Considering the valuation, the market appears to be rewarding ODFL's higher revenue growth with less regard to profitability - ODFL has demonstrated better revenue growth: 6.1% last Q (qoq), 32.3% last Q (yoy), 24.5% LTM, and 6.1% annually in last 3 FY - In comparison, CSX has grown at 10.1%, 24.3%, 12.0%, and -2.5% respectively, during the same periods - However, CSX has shown greater profit generation promise: CSX, 37.5% average margin, 3.6% average margin expansion, and 41.6% cash flow - The corresponding values for ODFL stand at 24.7%, 6.5%, and 22.8%Note: Average margin is based on average of last Q, LTM, and last 3 FY, while margin change is based on last Q margin vs 3Y average
Growth & ProfitCSXOld Dominion Freight Linevs Old Dominion Freight Line As of 11/23/2021 Revenue GrowthLast Q Growth (QoQ)10.1%6.1%Growing FasterLast Q Growth (YoY)24.3%32.3%Growing SlowerLTM Growth12%24.5%Growing SlowerLast 3 Fiscal Year CAGR-2.5%6.1%Growing Slower ProfitabilityLast Q OpInc Margin38.2%27.4%More ProfitableLTM OpInc Margin39.5%25.9%More ProfitableLast 3 Fiscal Year Average34.7%20.9%More ProfitableLTM FCF Margin41.6%22.8%Higher Cash Flow %
[3] Financial Risk: Also, is the market ignoring risk to ODFL? Unlikely as the company does not appear to be at higher risk vs CSX - ODFL has a better debt position, with debt as % of equity of 0.2% vs 19.9% for CSX - ODFL has more cash cushion, with cash as % of assets of 12.2% vs 5.4% for CSX
Financial RiskCSXOld Dominion Freight Linevs Old Dominion Freight Line As of 11/23/2021Debt as % of Equity19.9%0.2%Higher Debt LoadCash as % of Assets5.4%12.2%Worse Cash Position
[4] Market Returns: What about market returns of CSX vs ODFL? - ODFL has higher average annualized return of 55.9% vs 17.6% for CSX based on key market periods - These key market periods include, year-to-date, pre-covid to now, and 1, 2, and 3 years prior to covid
Precovid date is taken as end of Feb 2020
Notes:
[1] Q = quarter, LTM = last twelve months, FY = fiscal years, yoy = year-on-year, qoq = quarter-on-quarter
[2] Revenue growth decision is made by giving more weightage to long-term revenue growth (3-year average) and lesser weightage to quarterly growths
[3] Margin mentioned is average of last Q, LTM, and last 3 FY; margin increase is average of increase in last Q vs LTM and increase in last Q vs 3-FY average