Growth stories are seductive little beasts. They can taunt and torment you on valuation and make you relax your margin-of-safety standards "just this one time." Of course, right after you do that, they hit a bump in the road, professional investors lose their freakin' minds, the stock is down, and you have a loss on your hands.
I'm not predicting doom and gloom for Old Dominion
From a profit and performance perspective, there's still a lot to like here. Revenue was up more than 23%, and net income climbed 39%. A strong mix of shipment growth, higher-weight shipments, and decent pricing fueled the former. The latter was a product of better expense leverage -- about 90% of the company's growth came from service centers open longer than a year. And the operating ratio declined once again on a year-over-year basis (91.9 versus 92.7).
Looking out a bit, I can see this story setting up as a one-two punch. First, there's plenty more market share that Old Dominion can gain, particularly as it seems focused on a service-oriented model. Second, while the operating ratio has been improving, I think it could do even better once the center expansion program slows down a bit and the company dials in to more operating-efficiency improvements. After all, even given the differences from one company to the next, other operators, such as HeartlandExpress
So what about that valuation? Well, the stock seems to be below my fair-value estimate, though I confess that I might be guilty of juicing the growth estimates a bit too much. Still, well-run companies have this knack for surprising you and surpassing what you think they will (or can) do. So I'm going to take advantage of the mandatory 10-day wait here at The Motley Fool and see just how much I want to own this fast-growing trucker.
Haul off more Foolishness:
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).