RUSHA - Rush Enterprises: Looks Undervalued Based On Normalized Free Cash Flow
2024-03-15 01:59:22 ET
Summary
- Rush Enterprises is an underappreciated compounder. The company has gained share in the truck sales and parts industries over the past few decades at a high rate of return.
- I expect this to continue, as the factors that allowed this to happen will not disappear anytime soon.
- Investors should consider normalized cycle FCF when looking at Rush. Only looking at a single year of FCF would give an inaccurate picture of the company's true earnings power.
- I estimate RUSHA is trading around 12x normalized earnings for this cycle. Using a 15-20x multiple, I see a case for the stock to trade between $60 and $80.
Business Overview
In my opinion, Rush Enterprises, Inc. ( RUSHA ) doesn’t get enough praise or attention from investors. This is a business that has been around since the 60s, has been public since 1996 and over the last 20 or so years, the stock has had a CAGR of 15-20% depending on entry point. Impressively, the company hasn’t shifted its business model much in the decades since being publicly traded. The high level business overview in the 1997 annual report is almost identical to that from the most recent 2023 annual report....
Rush Enterprises: Looks Undervalued Based On Normalized Free Cash Flow