ODFL - Old Dominion Freight Line: Compounding Returns Through Market Share Growth

2024-03-19 20:17:19 ET

Summary

• ODFL’s revenue has grown well (+10%), driven by market share growth that has been achieved through the offering of market-leading services.
• Its growing scale and operational excellence have allowed its EBITDA-M to increase (+14ppts), allowing for an increase in distributions and reinvestment in growth, compounding returns.
• We believe its current trajectory is sustainable due to the substantial market share up for grabs. ODFL appears considerably ahead of its peers due to its existing trajectory.
• The company has considerable capex commitments (13% of revenue) but is positioned to ladder this down in the long-term, with existing investment directly translating to growth.
• ODFL’s valuation has rarely made sense, with an average FCF yield of 2.1%. Despite this, its share price has returned >1,000%. We struggle to justify a buy rating.

Introduction and thesis

Old Dominion Freight Line ( ODFL ) is a prominent transportation company specializing in less-than-truckload ((LTL)) shipping. The company has emerged as a key player in the logistics and freight industry....

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