Freightways: Higher Margins Do Not Make A Compelling Investment Case

2025-02-18 14:31:18 ET

Summary

• Freightways' revenue growth hasn't translated to higher earnings, with non-recurring costs impacting EBITA despite operational improvements and margin expansion efforts.
• The stock's OTC listing shows a discrepancy with its New Zealand home listing, suggesting better investment opportunities directly from the NZX.
• Freightways has significant growth opportunities in logistics, e-commerce, and waste management, but risks include GDP slowdown in Australia and New Zealand.
• Despite projected EBITDA and cash flow growth, the stock is currently overvalued, justifying a hold rating until margin improvements and debt servicing are evident.

In October 2024, I covered Freightways ( FTWYF ) with a hold rating , noting that revenue growth was not translated into higher earnings. Since then, the OCT listing has remained flat, but this is mostly due to the lack of supply and demand for the OTC listing resulting in a lack of reflective price making. That's also why I believe that if you're interested in investing in a name, it's most often beneficial to consider buying directly from the home listing. In this case, that's the listing in New Zealand, where the stock trades under the ticker FRW . The price at the New Zealand Stock Exchange increased 11.6% which after currency fluctuations would indicate that the USD denominated price went up 6.5%. So, the OTC listing does show a discrepancy with the underlying value....

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