[1] Market Valuation: At P/EBIT of 31.8, ODFL stock is more expensive per dollar of operating profit compared to 16.2 for NSC
Market ValuationNorfolk SouthernOld Dominion Freight Linevs Old Dominion Freight LineAs of 11/20/2021 Price To Sales Ratio (P/S)6.48.2CheaperPrice To OpInc Ratio (P/EBIT)16.231.8CheaperPrice To Earnings Ratio (PE)23.842.8Cheaper
[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, NSC has grown at 1.9%, 13.8%, 9.7%, and -2.5% respectively, during the same periods - However, NSC has shown greater profit generation promise: NSC, 37.6% average margin, 6.3% average margin expansion, and 38.5% 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 & ProfitNorfolk SouthernOld Dominion Freight Linevs Old Dominion Freight Line As of 11/20/2021 Revenue GrowthLast Q Growth (QoQ)1.9%6.1%Growing SlowerLast Q Growth (YoY)13.8%32.3%Growing SlowerLTM Growth9.7%24.5%Growing SlowerLast 3 Fiscal Year CAGR-2.5%6.1%Growing Slower ProfitabilityLast Q OpInc Margin39.8%27.4%More ProfitableLTM OpInc Margin39.6%25.9%More ProfitableLast 3 Fiscal Year Average33.5%20.9%More ProfitableLTM FCF Margin38.5%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 NSC - ODFL has a better debt position, with debt as % of equity of 0.2% vs 19.8% for NSC - ODFL has more cash cushion, with cash as % of assets of 12.2% vs 3.8% for NSC
Financial RiskNorfolk SouthernOld Dominion Freight Linevs Old Dominion Freight Line As of 11/20/2021Debt as % of Equity19.8%0.2%Higher Debt LoadCash as % of Assets3.8%12.2%Worse Cash Position
[4] Market Returns: What about market returns of NSC vs ODFL? - ODFL has higher average annualized return of 55.6% vs 18.3% for NSC 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
