Yahoo Finance How Is YRC Worldwide Valued against Its Peers?
An Investor's Perspective of YRC Worldwide
YRCW’s impressive bounceback
YRC Worldwide’s (YRCW) adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) grew by 36.3% on a year-over-year basis in 2015. The adjusted EBITDA margin also rose from 4.8% in 2014 to 6.9% in 2015.
The adjusted EBITDA for the YRC Freight segment went up by a staggering 68%. The YRC Freight segment contributes 63% to YRCW’s total revenues.
YRCW’s stock falls below $1
In the third quarter of 2011, the common stock of YRC Worldwide (YRCW) traded below the $1.00 mark for more than 30 consecutive trading days. For some time in the fourth quarter of 2011, the stock was delisted from NASDAQ, part of YRCW’s bumpy ride.
EV-to-forward EBITDA multiple
The historical five-year EV-to-forward EBITDA ( enterprise value to forward earnings before interest, tax, depreciation, and amortization) multiple trend shows that for roughly two years until March 2013, the EV-to-forward EBITDA multiple for YRCW traded above the peer group. It can be attributed to a change in management and the aggressive restructuring program implemented by the company.
However, after March 2013, the multiple for the peers, including Old Dominion Freight Line (ODFL), SAIA Inc. (SAIA), ArcBest Corporation (ARCB), and XPO Logistics (XPO), surged above YRCW. During the same time, YRC Worldwide made attempts to purchase ABF Freight Systems from parent Arkansas Best Corporation.
The SPDR S&P Transportation ETF (XTN) holds 8.9% in all the above-discussed companies, including YRCW.
IBT, the organization which included most of YRCW’s unionized employees, objected to the proposed combination. As discussed in Part 4, YRC’s Teamsters employees experienced a series of wage and pension cuts until March 2013.
What analysts say
Out of the five analysts tracking YRCW, four are advising investors to “buy” the stock. Only one analyst is recommending them to “hold” the company’s common shares. The consensus 12-month price target is $20.25 per share. On a consolidated basis, its adjusted EBITDA margin has improved from 4.8% in 2014 to 6.9% in 2015. The Wall Street analysts are expecting the EBITDA to grow by 19.1% and 32.7% in 2016 and 2017, respectively, from the 2015 level.
The company has withstood in the competitive LTL industry (SWFT), despite having gone through some rough patches. The renewal of its fleet in 2015 has given a boost to the company on the competition front. Although the company trades on razor-thin operating margins, the continuous focus on curtailing operating costs should help the company to improve its bottom line in the future.
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