Why TravelCenters of America Shares Were Rolling Higher Today

Is this meaningful? Or just another movement?

Jeremy Bowman
Jeremy Bowman
Jun 9, 2014 at 6:27PM
Consumer Goods

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of TravelCenters of America (NASDAQ:TA) were headed north today, climbing as much as 12% and finishing up 9% on a strong fourth-quarter earnings report.

So what: The truck-stop operator said revenue fell 1% to $1.91 billion in the quarter, in line with the estimates, and the bottom line fell from $0.08 per share to an adjusted loss per share of $0.39, after removing an income tax benefit. Still, adjusted EBITDAR improved 4% in the quarter, showing some signs of progress. Management noted that the improvements to properties it acquires takes a long time to complete, and CEO Thomas O'Brien said his outlook remains "positive" despite the slow progress.

Now what: Given the seemingly weak quarter, the market's reaction was surprising. As reported, earnings were $0.39 per share because of benefits from changes in the valuation of deferred tax assets, and on a sales basis, TravelCenters remains incredibly cheap at a P/S ratio of 0.04. The company acquired 41 sites last year, more than double the total it added in 2011 and 2012, and those assets should pay off down the line. Shares of TravelCenters crashed in 2007 and never really recovered, but growth on the top and bottom line could help push the stock back to its former heights. Keep an eye out for that turnaround going forward.