With the expansion of global trade and the growth of e-commerce, the importance of freight carriers has grown exponentially. As supply chains continue to ease, it could be wise to buy freight stock Daseke, Inc. (DSKE) to capitalize on the industry’s growth prospects.
In this piece, we have discussed several reasons why DSKE is our top freight pick for May.
DSKE’s EPS and revenue came above analyst estimates in the fourth quarter. Its EPS came 58.8% higher than the consensus estimate, while its revenue beat analyst estimates by 2.8%. DSKE’s CEO Jonathan Shepko said, “We are proud to report our fourth quarter results, capping off a successful full-year 2022, a year in which we generated top-line and bottom-line growth, and strong cash flow.”
During the fourth quarter, DSKE completed the repurchase of approximately 30% of its issued and outstanding common shares. The share repurchases created value for its shareholders. For fiscal 2022, the company achieved a record adjusted EBITDA of $234.90 million, registering growth of 5.3% over the prior-year period.
“We will now shift out capital allocation priorities in favor of enhancing our balance sheet strength via gross leverage reduction, and select tuck-in M&A. We remain diligent in our commitments to drive operational excellence and shareholder value, and I’d like to thank our entire team for their focus and dedication in support of our many tremendous accomplishments this year,” he added.
For fiscal 2023, DSKE expects its revenue to achieve flat to low-single-digit growth year-over-year. Its adjusted EBITDA is expected to be equal to fiscal 2022.
Mr. Shepko said, “Looking ahead to 2023, we anticipate improved demand for our freight-haul services during the mid-year, which is consistent with our historic business trends. Further, we expect improvements in operational productivity, along with driver availability facilitating the incremental seating of higher-margin company trucks.”
DSKE’s stock has gained 44.3% over the past six months and 41.3% over the past year to close the last trading session at $8.04.
Here’s what could influence DSKE’s performance in the upcoming months:
Robust Financials
DSKE’s revenue for the fourth quarter ended December 31, 2022, increased 3.5% year-over-year to $408.20 million. Its free cash flow increased 70.8% year-over-year to $34.50 million. Also, its adjusted net income increased 20.8% year-over-year to $15.70 million. In addition, its adjusted EPS came in at $0.25, representing an increase of 38.9% year-over-year.
For the fiscal year ended December 31, 2022, DSKE’s total revenue increased 13.9% year-over-year to $1.77 billion. The company’s cash and cash equivalents – end of period increased 4% year-over-year to $153.40 million. Its adjusted net income increased 11.4% year-over-year to $86.70 million. Also, its adjusted EPS came in at $1.24, representing an increase of 13.8% year-over-year.
Favorable Analyst Estimates
Analysts expect DSKE’s EPS for fiscal 2023 and 2024 to increase 22.4% and 55.3% year-over-year to $0.86 and $1.33. Its revenue for fiscal 2023 and 2024 is expected to increase 0.7% and 4.7% year-over-year to $1.79 billion and $1.87 billion.
Discounted Valuation
In terms of forward EV/EBITDA, DSKE’s 4.78x is 54% lower than the 10.39x industry average. Its 9.78x forward EV/EBIT is 33.1% lower than the 14.62x industry average. Likewise, its 6.48x forward non-GAAP P/E is 60.8% lower than the 16.53x industry average.
Mixed Profitability
In terms of the trailing-12-month levered FCF margin, DSKE’s 4.81% is 6.5% higher than the 4.52% industry average. Likewise, its 1.55x trailing-12-month asset turnover ratio is 94.5% higher than the industry average of 0.80x.
On the other hand, its 2.37% trailing-12-month Capex/Sales is 17.9% lower than the 2.89% industry average. Likewise, its 10.48% trailing-12-month EBITDA margin is 20.1% lower than the 13.12% industry average.
POWR Ratings Show Promise
DSKE has an overall rating of B, equating to a Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. DSKE has a B grade for Value, consistent with its discounted valuation.
It has a B grade for Sentiment, in sync with its favorable analyst estimates.
DSKE is ranked first out of 20 stocks in the Trucking Freight industry. Click here to access DSKE’s ratings for Growth, Momentum, Stability, and Quality.
Bottom Line
DSKE’s stock is trading above its 50-day and 200-day moving averages of $7.68 and $6.69, respectively, indicating an uptrend. The company expects improved demand for its freight-haul services during the mid-year. It also expects its adjusted EBITDA for fiscal 2023 to remain equal to its record-breaking fiscal 2022 figure.
Given its robust financials, discounted valuation, and favorable analyst estimates, it could be wise to buy the stock now.
How Does Daseke, Inc. (DSKE) Stack Up Against Its Peers?
DSKE has an overall POWR Rating of B, equating to a Buy rating. Check out these stocks within the Trucking Freight industry stocks with a B (Buy) rating: P.A.M. Transportation Services, Inc. (PTSI) and Element Fleet Management Corp. (ELEEF).
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DSKE shares were trading at $8.28 per share on Wednesday afternoon, up $0.24 (+2.99%). Year-to-date, DSKE has gained 45.52%, versus a 8.15% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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