Is This Trucker Still the Best?

When you include the word best in your name, you set a pretty high bar for expectations. Fortunately for trucking company Arkansas Best (NASDAQ:ABFS), it has been able to more than meet those lofty aspirations. Shares, which now trade at about $40, could have been had for less than $25 in 2003 and less than $10 in 2000. Just think of all those people (your humble author included) who held a fatally flawed tech stock in late 2000 on the hopes of a rebound when they could have been backing the truck up for these shares.

Sales for the fourth quarter grew 15% to just under $455 million. Net income was up even more strongly -- 66% to $24.4 million. Profits were juiced not only by stronger revenue, but also by a 3.1% improvement in operating margin (which the trucking industry reports as operating ratio).

Arkansas Best has the sort of management you just gotta love. Not only does it give you all the business metrics you could want in the earnings release, but it manages the business with a keen focus on returns on capital. Not surprisingly, the company's returns on equity and assets are well above industry averages and among the best in the comparable group.

While the company has an outstanding authorization to buy back up to around 12.6 million additional shares, no purchases were made during the quarter. Going a step further, several insiders sold stock throughout the fall -- suggesting to this Fool that the company's own management doesn't see the stock as screamingly cheap.

While Arkansas Best reported that pricing has remained reasonably strong in January, this won't go on forever. Pricing in the trucking sector has been helped by a supply crunch brought about by fewer trucks operating and new government regulations. That supply crunch seems to be easing up, and if that holds true, pricing will eventually decline.

These shares trade at only about 14 times trailing earnings and at similar rate of enterprise value to free cash flow. While that's not high at all compared to the market, Fools should realize that they have traded as low as 2.4 times trailing earnings within the last five years. Even though that sort of multiple contraction is a really scary thought, I doubt that's going to happen again soon. While pricing may be easing a bit, there's still strong demand for trucking. Even still, I'd like to see management buying shares before I'd suggest doing the same.

Fool contributor Stephen Simpson, a chartered financial analyst, has no ownership interest in any stocks mentioned.