Sell Roadrunner Transportation Before Elliott Can Take Control

About: Roadrunner Transportation Systems, Inc. (RRTS), Includes: BCS, BLK
by: Wilsonville Capital
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Wilsonville Capital
Growth, momentum, long only, IPOs

Roadrunner Transportation Systems, Inc. is an asset-right transportation service company offering different logistics and supply chain solutions to clients in the United States.

The amount of accounts receivable seems quite large, equal to $285 million as of September 30, 2018. It comprises 33% of the total amount of assets.

The company is getting paid late, which means that it needs to look for additional financing sources, which is never ideal.

The amount of goodwill, equal to $264 million, and acquired intangible assets of $44 million is also significant. Accountants have many times issues assessing the valuation of such type of assets, thus investors may not appreciate them.

The company’s debt/equity ratio equals 27x, and peers have a ratio of 0.1-0.55x. With these figures in mind, most investors will not be able to justify why the shares are trading overvalued.

With a massive amount of preferred stock and debt, Roadrunner Transportation (NYSE:RRTS) should not be appreciated by common stockholders. The company seems to be selling equity and subscription rights to pay debt holders