Here’s Why This Canadian Stock Is the Best North American Logistics Investment

TFI International Inc. (TSX:TFII) goes head to head with two American rivals; which stock deserves a place in your portfolio?

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Investors looking for exposure to the logistics industry have three solid choices today — though only one of them is a Canadian stock.

But what a great TSX index stock it is. TFI International (TSX:TFII) has had a great 12 months: a one-year past earnings growth of 298.5% shows that this is the stock to stack if you want to beat the competition. Indeed, it even beats itself, with a five-year average past earnings growth of 23.4% highlighting just how good a year it’s been.

With a dividend yield of 2.51% heading up the reasons to buy, TFI International shows a range of both high-quality and good value stats: a 22% ROE for the last year is significantly high for the TSX index, while a P/E of 10.1 times earnings is spot on.

Reasons to stay away are few, but they should be noted: A P/B of 2.2 times book is a little high, though certainly not the worst such ratio for a Canadian stock, while a comparative debt level of 96.2% of net worth may put off those investors with a low appetite for risk. Meanwhile, a 5.4% expected annual growth in earnings is not significantly high.

What are the stats like south of the border?

Compare the data with that of its biggest American rival, FedEx (NYSE:FDX), and you’ll immediately start to see why TFI International may be the better logistics stock for newcomers. While its track record is strong, FedEx’s one-year past earnings growth of 68.4% is considerably lower than TFI International’s. They both have very similar five-year averages, though, with FedEx enjoying overall past earnings growth of 22.1% and a 9.6% expected annual growth in earnings.

Similarities abound in a debt level of 89.6% of net worth and a 26% last-year ROE. FedEx shows very similar valuation to TFI International, too, with a P/E of 9.2 times earnings and P/B of 2.3 times book. It’s almost uncanny how similar these two stocks are, in fact, though TFI International edges out on top next to FedEx’s lower dividend yield of 1.5%.

Is there any competition on the NYSE?

However, all of this is positively cheerful compared with that other American logistics and parcel transport company, United Parcel Service (NYSE:UPS). Its growth was positive, but much lower, with an increase in earnings over the last 12 months 52.4%, for instance, and a lower five-year average of 8.4%.

The valuation is worse, too, with a P/E of 16.1 times earnings (not so bad) and P/B of 28.1 times book (presented without comment). While a past-year ROE of 174% is significantly high for the market, a high level of debt at 747.5% shows that this stock is not for the risk-averse investor, though a higher dividend yield of 3.59% matched with an apparently industry standard 8.5% expected annual growth in earnings makes for a solid reason to buy.

The bottom line

Stick to the TSX index choice if you like a nicely valued stock with a great track record. If you want to get a bit of geographical diversification, you could always stack an American option alongside it; in this case, UPS might be the better option with its higher dividend yield, or stick with FedEx if you prefer a sturdier balance sheet.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Victoria Hetherington has no position in any of the stocks mentioned. David Gardner owns shares of FedEx. The Motley Fool owns shares of FedEx.

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