TFII - TFI International: Capital Deployment Valuation Make Stock A Compelling Buy
2024-07-24 08:54:21 ET
Summary
- TFI International shares continue to advance on strong fundamentals.
- Management continue deploying cash along an extensive reinvestment runway at an above-industry advantage.
- There are several advantages TFII enjoys over peers leading to an attractive outlook.
- At 2.8x EV/IC implies TFII is worth >$170 per share today.
Investment update
Following my September FY'23 publication on TFI International Inc (NYSE: TFII ) shares are +22% and there are numerous updates to the investment debate. The prior note, titled " Durable competitive advantages with attractive economic value ", made the case to buy TFII on several grounds, namely:
- The company has created economic value through capital allocation, NWC efficiencies, and returns on investment.
- ROICs are typically>10% which is high for the industry + TFII enjoys several advantages over peers.
- Business returns are underpinned by efficiency with turnover on capital ~1.15-1.2x on avg. since FY'21.
- Valuations supportive at the time at ~16x EBIT, and my view was management had an extensive runway to deploy funds at ~10% or more which could unlock value at these respective multiples.