WNC - Wabash National Corporation: A Wonderful Company But In A Low-Growth Sector
2024-05-02 12:36:00 ET
Summary
- Wabash National Corporation is a cyclical company in the trailer industry, with recent growth driven by the uptrend leg of the trailer cycle.
- The company has shown improvements in operating margins, capital efficiencies, and returns over the past few years.
- However, the current valuation does not provide a sufficient margin of safety, and it is recommended to wait for a price decline before investing.
Investment Thesis
Wabash National Corporation ( WNC ) is a wonderful company with growing operating margins, capital efficiencies, and returns over the past few years. But this is a cyclical company where part of the good performance over the past few years was the result of being in the uptrend leg of the trailer cycle. A valuation based on its performance over the cycle showed that there is currently not enough margin of safety. I would wait for the price to decline before investing.
Business background
WNC is a leading producer of trailers and liquid transportation systems that has re-positioned itself as a "leader of connected solutions for the transportation, logistics, and distribution industries."
Along this line, in 2021 the company realigned its reporting segments into 2:
- Transportation systems. This segment encompasses the design and production of transportation-related equipment such as various types of trailers and truck-mounted dry and refrigerated bodies.
- Parts and services. Apart from the parts and services businesses from historical segments, this segment also covers truck body up-fitting, composites products, and Trailers as a Service (TAAS) initiative.