Finding Value: TravelCenters of America

 |  Includes: CNW, SAIA, TA, YRCW
by: Pitbull Trading

TravelCenters of America (NYSEMKT:TA) stock is down 10% today on no news, and I believe that it is time to buy shares of this undervalued company. TA's success is directly levered to the health of the overall economy, as their livelihood is connected to the movement of goods in our nation. As our country comes out of this recession and business picks up all around, truck drivers will be needing to fill up with more gas from TravelCenters gas stations. As gas sales make up a vast majority of TA's revenues, this company's ability to earn solid profits are invariably tied to the success of our nation's economic condition.

About TA: TravelCenters of America LLC operates and franchises travel centers primarily along the United States interstate highway system. Its customers include long haul trucking fleets and their drivers, independent truck drivers and motorists. As of December 31, 2008, the Company’s business included 233 travel centers located in 41 states in the United States and the province of Ontario, Canada. Its travel centers include 166 that are operated under the TravelCenters of America (TA) brand names, including 143 that it operates and 23 that franchisees operate. Sixty-seven are operated under the Petro brand name, 45 of which are operated by the Company and 22 by the franchisees. It offers a range of products and services, including diesel fuel and gasoline, truck repair and maintenance services, full service restaurants, more than 20 different brands of quick serve restaurants (QSRs), travel and convenience stores and various driver amenities.

As the esteemed Sham Gad states, TA is a Rare Bargain Today.

"Assuming that there's hope for this business, TA still remains dirt cheap, despite the weak quarter. The current market cap is about $90 million. Cash on the balance sheet is $185 million. While TA has no long term debt, it does have $75 million in deferred rent liabilities as part of an agreement with HPT. Moreso, tangible book value per share is over $20. And TA's assets are very difficult to replicate - prime land on some of the nation's busiest highways. It's no surprise that TA counts as shareholders Leucadia, a conglomerate ran by astute investors Ian Cumming and Joe Steinberg."

In essence, TA offers a highly levered trade on the global economic turnaround emerging from the disaster that was the financial crisis or 2008. The company currently has $88 million in operating cash flow, and trades at a market cap today of only $57 million. They have a total cash balance of $185 million vs total debt of $101 million. TA is a deeply undervalued company whose shares could very well meet up with its book value of $21.00 in the next couple of years. I think that at $3.43 where it closed today, the downside is very well defined. The upside reward is very attractive here, you can buy shares of TA for below the cash value on their balance sheet without paying a penny for their future prospects. Deep values like this one don't come around all that often, I recommend staking your claim to some shares before they are back above $5.00.

Disclosure: Long TA