Wabash National Is A Cheap Play On A Strong Economy

Summary

• Wabash National operates in a cyclical industry but has been working to diversify its revenue stream.
• The company trades at a cheap valuation, signaling risk may already be priced in.
• The company should be able to continue to prove itself, which will ultimately earn it a higher valuation.
• For patient investors, the risk could well be worth the reward.

Source

Wabash National (NYSE:WNC) is a manufacturer of trailers, vans, flatbeds, refrigerated trucks, and even pharmaceutical equipment. The company has been seen as a cyclical play on the economy due to the nature of what it produces. Generally, when companies are selling less the need for transportation mechanisms declines. However, the economy is doing well and the shares trade as if there is a risk to the business model and earnings. The stock offers an attractive valuation and perhaps have more upside potential than downside risk. For the investor who can wait for consistent performance to result in a higher valuation, Wabash National is worth a look.

Performance

Wabash National reported first quarter earnings recently that beat on both the top and bottom lines.

Source: Seeking Alpha

Revenues continued to grow despite belief that the economy might have been slowing.

In the company's commercial trailer products segment, revenue increase just over 4%.

Source: Earnings Slides

The company did, however, see margins decline due to higher material costs and some supplier disruptions. Hopefully going forward the company can pass along higher costs through higher prices. This can happen easily during a strong economy, especially when offering a premium product.

The company's diversified products group saw revenue rise at a similar rate, but also saw margin expansion.

Source: Earnings Slides

The company was helped by the mix of sales and pricing initiatives taken the year before.

Lastly, the strongest growth came in final mile products.

Source: Earnings Slides

This is probably due to the strong demand for delivery of products from purchases made online. Due to the increased demand for package volume and shipments, companies are in need of additions to their fleet. Wabash produces an excellent product that can help transporters increase efficiency and at a reasonable cost.

The company had

Analyst’s Disclosure:I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.