Dang it! I really wanted less-than-truckload trucking company Old Dominion (NASDAQ:ODFL) to miss its numbers this quarter. Not a total screw-up, mind you, but just enough to get a 5% to 10% haircut on the stock. Now, before you loyal shareholders team up with management to send a big rig through my front door, lemme explain. I was just hoping to get a chance to buy this stock again within my fabled "margin of safety" boundary.
Anyway, it was another good quarter for this sorta-local company. Revenue rose nearly 28%, margins improved yet again, and net income climbed more than 30% for the quarter. On the margin front, Old Dominion's operating ratio improved by 50 basis points to 89.5% as the company managed to keep the growth of wage and benefit expenses (which make up more than 60% of the operating expense base) below the revenue growth rate.
Old Dominion continues to grow at rates well above the broader trucking sector. In the third quarter, the company reported that less-than-truckload tons increased almost 22% over last year with a better than 17% increase in shipments and a nearly 4% jump in weight per shipment. More shipments, more tonnage, better rates per mile, better profits per mile -- it's a winning combination.
Compared with other truckers, Old Dominion isn't the most profitable, doesn't have the best return on equity or assets, and pays no dividend at all. Yet it scores quite well by the standard that ultimately matters the most to investors: stock price performance. It is one of the better performers among the larger companies in the sector.
Priced around $33.50 at the time of writing, the stock looks fairly valued to me. That is, I think the risk and reward are pretty much in balance. That would be fine if I were already an owner, but I like a little cushion -- that margin of safety -- when I commit new money to an idea. Selling this stock too soon was one of my classic bonehead moves, but I don't want to compound the mistake by rushing back in -- although waiting more than a year is hardly "rushing." But let this be a lesson to all of us who hold small, well-run growth stories: Selling too soon can rob of you of some nice appreciation potential.
For more big-rig gigs:
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
