The Motley Fool

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

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.

Just Released! 5 Stocks Under $49 (FREE REPORT)

Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $49 a share.
Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.
Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.

Claim your FREE 5-stock report now!

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.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.

I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls. I understand I can unsubscribe from these updates at any time. Please read the Privacy Statement and Terms of Service for more information.