Landstar, which was added to our small- and mid-cap watch lists at yesterday’s closing price, is trading at about 23x last year’s earnings and 21x the estimates for next year even after today’s rally, which is in line with the company’s five-year average and well below the 30’s multiple assigned to CH Robinson, though the latter is both larger and growing a bit faster.
But the big news for Landstar’s valuation could be the very anniversary of significant hurricane revenue that made the current comparison so unfavorable. Because without the overhang, Landstar may now be able to close the multiple gap between itself and its nearest competitors.
Digging a little further into the financials, we were pleased to see a year/year cash accumulation despite real share buybacks (the kind that reduce shares outstanding rather than replace exercised executive options). This was due in part to the company collecting on last year’s accounts receivable from the government, which allowed for significantly more cash to come in than was recorded as 2006 earnings (the earnings were in 2005, ahead of the cash). While the release was not as detailed as would be found in a 10Q, it looks pretty good.
Disclosure: as of January 31, author was short Landstar (LSTR) put options.
LSTR 1-yr chart:
No wonder the stock is rising.