Here's Why CSX Stock Is A Better Pick Over This Trucking Company
We think thatCSX stock (NYSE: CSX) currently is a better pick compared to Old Dominion Freight Line (NASDAQ: ODFL), despite Old Dominion Freight Lines revenue growing at a faster pace over the recent years, and ODFL stock is trading at a more expensive valuation compared to CSX stock. While CSX trades at 7x its trailing revenues, ODFL is trading around 8x. Even if we were to look at other valuation metrics, ODFL stock appears to be more expensively priced with 32x P/EBIT ratio and around 43x P/E ratio, compared to 17x and 22x for CSX stock, respectively.
Although both the companies saw a rise in revenue over the recent quarters, led by the economic recovery, the growth has been better for Old Dominion Freight Line, aided by high demand for less-than-truckload (LTL) shipments as well as average revenue per shipment, with a surge in demand for goods due to opening up of the economy. However, there is more to the comparison. Lets step back to look at the fuller picture of the relative valuation of the two companies by looking at historical revenue and operating margin growth. Our dashboard CSX vs Old Dominion Freight Line:Industry Peers; Which Stock Is A Better Bet?has more details on this. Parts of the analysis are summarized below.
1. Old Dominion Freight Lines Revenue Growth Has Been Stronger
Old Dominion Freight Lines revenue growth over the last twelve month period was stronger than CSX (24% vs. 12%), given a high demand for the trucking industry at large. Even if we were to look at the three-year average revenue growth, Old Dominion Freight Lines CAGR of 6% is higher than the CAGR of -2% for CSX. Barring 2020, Old Dominion Freight Lines revenue has been on a steady rise with increased demand for trucking industry. For CSX, the revenue growth was impacted during the pandemic due to lower production across various industries, resulting in lower demand for railroad transportation. Our dashboard on CSXs revenuesoffers more details on the companys segments.
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