Freight Stocks

Ryder System Inc Valuation – June 2018 $R

Company Profile (excerpt from Reuters): Ryder System, Inc., incorporated on March 22, 1955, offers transportation and supply chain management solutions. The Company operates through three segments: Fleet Management Solutions (FMS), which provides leasing, commercial rental, contract maintenance and contract-related maintenance of trucks, tractors and trailers to customers principally in the United States, Canada and the United Kingdom; Dedicated Transportation Solutions (DTS), which provides vehicles and drivers as part of a dedicated transportation solution in the United States, and Supply Chain Solutions (SCS), which provides supply chain solutions, including distribution and transportation services in North America and Asia. Through its FMS business, the Company provides its customers with various fleet solutions. In addition, the Company provides its customers to purchase a selection of used trucks, tractors and trailers through its used vehicle sales program. Its customer base includes enterprise operating in various industries, including food and beverage service, transportation and warehousing, automotive, retail and consumer goods, industrial, housing, technology, business and personal services, and other.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of R – June 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $3,827,903,833 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.72 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 278.31% Pass
6. Moderate PEmg Ratio PEmg < 20 9.26 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.33 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.72 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -10.04 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $7.76
MG Growth Estimate 14.24%
MG Value $287.06
Opinion Undervalued
MG Grade A
MG Value based on 3% Growth $112.58
MG Value based on 0% Growth $65.99
Market Implied Growth Rate 0.38%
Current Price $71.86
% of Intrinsic Value 25.03%

Ryder System, Inc. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $3.98 in 2014 to an estimated $7.76 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.38% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Ryder System, Inc. revealed the company was trading below its Graham Number of $80.27. The company pays a dividend of $1.8 per share, for a yield of 2.5%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 9.26, which was below the industry average of 183.89, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-142.72.

Ryder System, Inc. fares extremely well in the ModernGraham grading system, scoring an A.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$142.72
Graham Number $80.27
PEmg 9.26
Current Ratio 0.72
PB Ratio 1.33
Current Dividend $1.80
Dividend Yield 2.50%
Number of Consecutive Years of Dividend Growth 13

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Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $1,311,521,000
Total Current Liabilities $1,809,280,000
Long-Term Debt $4,999,770,000
Total Assets $11,736,157,000
Intangible Assets $421,868,000
Total Liabilities $8,877,342,000
Shares Outstanding (Diluted Average) 53,013,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.35
Dec2017 $14.87
Dec2016 $4.90
Dec2015 $5.71
Dec2014 $4.11
Dec2013 $4.53
Dec2012 $4.09
Dec2011 $3.28
Dec2010 $2.25
Dec2009 $1.11
Dec2008 $3.50
Dec2007 $4.24
Dec2006 $4.04
Dec2005 $3.52
Dec2004 $3.28
Dec2003 $2.06
Dec2002 $1.50
Dec2001 $0.31
Dec2000 $1.48
Dec1999 $6.11
Dec1998 $2.16

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $7.76
Dec2017 $8.26
Dec2016 $4.85
Dec2015 $4.67
Dec2014 $3.98
Dec2013 $3.63
Dec2012 $3.07
Dec2011 $2.66
Dec2010 $2.58
Dec2009 $2.92
Dec2008 $3.79
Dec2007 $3.77
Dec2006 $3.32
Dec2005 $2.68
Dec2004 $2.08
Dec2003 $1.75
Dec2002 $1.84

Recommended Reading:

Other ModernGraham posts about the company

10 Low PE Stock Picks for the Defensive Investor – February 2017
10 Undervalued Companies for the Defensive Investor – February 2017
10 Undervalued Companies for the Defensive Investor – January 2017
10 Undervalued Stocks for the Defensive Investor – December 2016
10 Undervalued Stocks for the Defensive Investor – September 2016

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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