Since I put out my bullish piece on Ryder Systems Inc. (NYSE:R), the shares are down about 45% against a loss of about 6% for the S&P 500. In addition, I also recommended short put options in the previous article, so I thought I’d offer a review for how that trade worked out. In particular, I want to understand the extent of the damage. In particular, I want to determine whether I should hang on to the shares, or whether I should take my lumps, hopefully learn something, and move on. I’ll come right to the point. I think the recent insider buying activity is a strong indication that this company is still a great long term investment. Although I’m a bit nervous about future sources of cash relative to upcoming obligations, the shares are cheap enough that potential investors are compensated for that risk in my estimation. For those who are nervous about outright buying at these levels, the options market is presenting some very good premia at the moment.
Financial Snapshot
The financial history here has been interesting in my view. When I last reviewed the company, I noted that both the top and bottom lines have grown at a decent pace over the past several years, with revenue and net income up at a CAGR of 4.8% and 4.6% respectively. Over the past year, the company went from being consistently profitable to making a loss of $24.4 million. This was as a consequence of a large uptick in non-operating pension costs, used vehicle sales, and increased depreciation. The company experienced an uptick of ~$295 million of extra depreciation expense relative to the same time in 2018. I expect the depreciation headwind burden to lower over time. While net income has suffered, cash from operations was up dramatically in
