Hub Group (NASDAQ: HUBG)
Quality Value Investing Research Report | $HUBG Updated Coverage | May 2024
Summary
Hub Group, Inc. is a dividend-paying small-cap stock in the industrials sector's air freight and logistics industry.
A narrow economic moat supports the company's high-quality business model.
Its stock price remains undervalued, especially in the all-important cash flow ratios. However, its share price downside risks are merely average.
QVI maintains its coverage rating of Hub Group in the Expanded Real-Time Stock Picks as a result of this updated research report.
When referencing this research report, access your Quality Value Investing (QVI) Glossary of Investing Terms and Metric Targets and Research Report Format Guide. Unless noted, all data presented is sourced from Seeking Alpha Premium as of the market close on May 22, 2024, and intended for illustration only.
In this updated coverage QVI Research Report, we’ll reexamine the Expanded Real-Time Stock Picks industrials sector holding, Hub Group, Inc., to see if it continues to meet Quality Value Investing’s criteria based on our checklist analysis of the business’s current wealth and its stock’s present value.
Hub Group: Company Current Wealth
Value Proposition
Hub Group, Inc. ($HUBG) is a dividend-paying small-cap stock in the industrials sector’s air freight and logistics industry. It was added to the QVI Real-Time Stock Picks on May 2, 2023, at $37.56 cost basis per share.
Hub Group Inc., a supply chain solutions provider, offers transportation and logistics management services in North America. The company’s transportation services include intermodal, truckload, less-than-truckload, flatbed, temperature-controlled, and dedicated and regional trucking, as well as final mile, railcar, small parcel, and international transportation. Its logistics services comprise full outsourced logistics solutions, transportation management, freight consolidation, warehousing and fulfillment, final mile delivery, and parcel and international services. The company also provides dry van, expedited, less-than-truckload, refrigerated, and flatbed truck brokerage services. The company serves a range of industries, including retail, consumer products, and durable goods. Hub Group was founded in 1971 and is headquartered in Oak Brook, Illinois, USA.
Economic Moat
Morningstar assigns Hub Group a narrow moat rating, weighted toward the company’s intermodal shipping and marketing operations, which trails only JB Hunt ($JBHT).
QVI’s Value Proposition Elevator Pitch for HUBG:
Hub Group is the number two intermodal marketing company in the freight transportation and logistics services space. It has plenty of opportunity for growth over the longer term despite near-term recessionary fears and the potential effects on the trucking industry.
QVI’s value proposition rating for Hub Group: Bullish.
Returns on Management
Revenue Growth and Net Profit Margin
Per the chart below, Hub Group’s trailing three-year annualized revenue growth was mid-single-digits positive and aligned with the industrials sector’s +5.03% median growth. However, the company’s topline growth was negative -22.04% for the most recently reported twelve months.
Farther down the income statement, Hub Group’s three-year, mid-single-digit positive net profit margin aligned with the sector’s median net margin of +6.04%.
Returns on Equity and Invested Capital
Hub Group’s senior management produced a three-year double-digit return on equity, or ROE, above QVI’s targeted threshold and the sector’s median ROE of +12.38%.
Stock buyback programs often elevate ROE. For example, Hub Group announced a $250 million share repurchase program in October 2023. Are they buying the shares at value prices on behalf of shareholders? We’ll answer the question in the valuation section of this report.
Hub Group’s three-year return on invested capital, or ROIC, was above QVI’s threshold and the sector’s median ROIC of +7.17%. Moreover, HUBG’s ROIC exceeded its weighted average cost of capital, or WACC, of 9.11%, demonstrating that its senior executives are adequate capital allocators. (Source of WACC: GuruFocus)
QVI’s business fundamentals rating for Hub Group.: Bullish.
Next, we’ll look at the company’s returns on management chart, enterprise downsize risks, the stock price’s present value, share price downside risks, and the investment thesis, each exclusive to Quality Value Investing’s premium (paying) subscribers.
Disclosure: At the time of this writing, I/we had no beneficial ownership of HUBG common shares in our family portfolio. I wrote this report myself, and it expresses my own opinions. I am not receiving compensation for it other than from Substack paid subscriptions. I have no business relationship with any company whose stock is mentioned in this post.
Additional Disclosure: Quality Value Investing by David J. Waldron’s primary ticker research reports are for informational purposes only. The accuracy of the data cannot be guaranteed. Narrative and analytics are impersonal, i.e., not tailored to individual needs nor intended for portfolio construction beyond his family portfolio, which is presented solely for educational purposes. David is an individual investor and author, not an investment adviser. Readers should always engage in their own research or due diligence and consider (as appropriate) consulting a fee-only certified financial planner, licensed discount broker/dealer, flat fee registered investment adviser, certified public accountant, or specialized attorney before making any investment, income tax, or estate planning decisions.