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|Includes: YRC Worldwide, Inc. (YRCW)

Check out this poor guy


A Contrarian Play with BIG Upside
Posted by: stockdocx99: Date: Oct 10, 2007 9:52pm

YRC Worldwide [NDQ:YRCW] $26.74 - as of Oct. 10, 2007

YRCW is one of the biggest trucking companies in America and the world. YRCW is the result of the merger of Yellow Freight and Roadway Corporation in December of 2005. Earnings have dipped recently due to a general slowdown in economic activty. Ryder, another trucking firm, lowered their EPS forcast this week. Why then should we be looking to buy YRCW now? Price and value.

YRCW shares are within pennies of their 4-year absolute low price while revenues are near record levels. Book Value has never been higher than today's approximately $40/share. The current earnings estimates for 2007 and 2008 are $2.97 and $3.50 respectively making the P/E on next year's estimate a very low 7.7X. Those estimates already reflect the punk economic conditions expected over the next 12 - 18 months. In the good times of 2004 and 2005 YRCW earned $5.28 and $5.01 so they have proven normalized earnings power of at least $5 /share once conditions improve again.

YRCW spent heavily over the past year to buy into the mainland Chinese market through the acquisitions of local firms that have 30,000 customers and 3300 tractor trailers. Growth potential in China appears very substantial.

Currently YRCW controls about 60% of the LTL [less-than-truckload] market in the USA and will post revenues of almost $10 billion next year. Long-term debt is very managable at just 29% of capital. These shares now trade at under 0.7X tangible book value and at a forward P/E lower than all but one year in the past 16. That year was 2000 and YRCW shares then proceeded to climb from their 2000 low of $13.80 to a 2005 high of $64.50.

Buying when others are disinterested or fearful means having the courage of your own convictions and displaying patience to wait for the inevitable recovery. Management owned 1.1%, FMR [Fidelity Funds] owned 9.7%, and Barclays Global Investors owned 8.6% as of the March 2007 proxy statement.

Value Line feels the 'proper' long-term P/E for this company is 11X and that the 3 - 5 EPS will reach $6.40 /share as profit margins and sales return to more normal levels. Eleven times the 2008 estimate of $3.50 leads to a 15 month target price of $38.50 or 44% above today's closing quote. That appears to be a very conservative projection as YRCW shares have actually traded as high as $47.10 this year and above $50 in each year 2004 - 2006. They hit a high of $37 in 2003 - a year in which EPS were only $2.19.

Considering the big discount to book value, the Chinese growth vehicle and the extremely low current valuation YRCW shares offer big upside. The main risk here is a much worse than expected slowdown in the US.

I'm an aggressive buyer right here near 4-year lows and will continue to buy if these shares get a bit cheaper in the short term. $40 - 50 seems a very reasonable 24 month goal price for a potential 50% + gain.


Despite a rally in this stock over the past 3 months Mr Price has lost over 90% on this untimely pick

See how a wonderful sounding writeup based on the musings of a mistaken ill advised person can lead to someone losing their money.

Beware internet ass clowns,especially those who say they made over 10 million