Logistics plays are especially attractive during times of supply chain tightness, argues Paul Price
With investors getting a real-time lesson in the crucial role of supply chains in the economy, Paul Price has taken a fresh look at one of his favorite plays in the sector.
Logistics companies are a popular investment in general right now. Surging demand for durable goods continues to outrun available capacity to move them. The upshot is that logistics companies currently have plenty of demand for every square foot of space they can ship.
In the case of Knight-Swift Transportation Holdings (KNX) – Get Knight-Swift Transportation Holdings Inc. Class A Report, however, it’s more than that.
“I’ve written many times about Knight-Swift Transportation Holdings over the past two years. The company and its shares performed well,” Price wrote recently on Real Money.
After its fourth-quarter results were released, “the stock popped briefly to $57… Management raised EPS guidance for 2022 to a mid-point of $5.20, up from $4.71 last year, which established a new all-time record. KNX is a proven ‘left to right’ growth stock that’s now very reasonably valued.”
Reasonably valued but, asks Price, what is KNX really worth?
“Simply rebounding to a more traditional price-to-earnings supports a 12-month target price of about $78,” Price wrote. “That implies year-ahead total return potential north of 44% on a somewhat low-risk stock.”
KNX is not the only logistics company that Price likes.
“Heartland Express (HTLD) – Get Heartland Express, Inc. Report is another of my favored names in the trucking industry. Like KNX, it announced all-time record EPS for 2021,” Price said. “Despite that good news, this debt-free company sold off along with the broad market.”
“My advice? Keep on trucking.”