TFSA Investors: Retire Early on Canada’s Best Transportation Stock

Transportation powerhouse TFI International Inc (NYSE:TFII)(TSX:TFII) has a strong balance sheet, trades at 18 times earnings, and provides services to the fast-growing North American economy. Is this the buying opportunity of a lifetime?

| More on:

TFI International (NYSE:TFII)(TSX:TFII) is a leading player in the transportation and logistics industry. TFI services more urban centres than any other carrier in Canada and offers North American customers a variety of transportation solutions. The company’s scope extends to all of Canada, the United States and Mexico.

The company transports package and couriers, less than load (LTL) freight, full truck load (TL) freight, and offers logistics and last mile solutions. Through internal growth and acquisitions, the company has enhanced shareholder value, increased geographic scope and expanded product offerings.

The company is very cheap, with a price-to-earnings ratio of just 18.11, a price-to-book ratio of 2.83, and market capitalization of $6.83 billion. Debt is managed prudently by TFI, as evidenced by a debt-to-equity ratio of just 0.77. The company has excellent performance metrics with an operating margin of 9.97% and a return on equity of 17.80%.

The package and courier segment provides pickup, transport and delivery services across North America. The LTL segment provides pickup, consolidation, transport and delivery services of smaller loads. The TL segment provides full loads carried directly from the customer to the destination and includes expedited transportation, flatbed, container and dedicated services.

Generally, demand for freight transport is closely linked to the state of the overall economy. Consequently, TFI’s performance is impacted by a change in general economic conditions. However, the company’s extensive customer base, broad geographic dispersion and participation in four distinct segments reduces the effects of any economic downturn.

TFI has the largest trucking fleet in Canada and has developed a significant presence in the United States. The company owns valuable assets in the form of power units and trailers. The trucking business has high barriers to entry since a large number of licenses are necessary to operate in North America, which TFI has already obtained.

TFI has a diverse base of clients operating across a broad cross section of industries. Due to the breadth of the company’s client base, a downturn in the activities of individual customers or in a particular industry does not adverse impact TFI’s operations.

In the last several years, TFI has formed strategic alliances with other transport companies in North America, in order to offer customers a broader geographic network. TFI’s operations are highly seasonal and aligned with general demand for freight and non-freight transportation.

Historically, demand is stable with the weakest demand in the first quarter. TFI’s fuel consumption and maintenance costs rise during winter months. The transportation and logistics industry is highly fragmented and consists of relatively few large companies and many small companies serving target markets.

In the trucking industry, smaller operators typically operate in a highly-specialized yet competitive environment in which the customer may have several alternative carriers available. TFI and other trucking operations compete with other modes of transportation such as rail, air freight and maritime transportation. These modes of transportation play an important role in the growth of the North American economy.

In summary, TFI appears to be a great way for retail investors to gain exposure to the fast-growing transportation and logistics industry.

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 Nikhil Kumar has no position in any of the stocks mentioned.

More on Investing

ways to boost income
Dividend Stocks

This 3.8% Monthly Payer Is the Ultimate Sleep-Well-at-Night Stock

Restaurant Brands International (TSX:QSR) stock may not be exciting, but it can help solidify your income portfolio this summer.

Read more »

Aircraft Mechanic checking jet engine of the airplane
Investing

1 Aerospace Stock That’s My Industrial Sector Champion

Bombardier is an aerospace stock that has surged over 1,400% in the last five years. Is the TSX stock still…

Read more »

farmer holds box of leafy greens
Metals and Mining Stocks

This Fertilizer Stock Yields 3.78% and Feeds the World

Nutrien (TSX:NTR) stock has a juicy payout as investors await a potash and nitrogen rebound.

Read more »

dividends can compound over time
Dividend Stocks

The 6% Dividend That Compounds Your Wealth Every 30 Days

This TSX royalty stock pays monthly and is backed by hundreds of pizza restaurants.

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Friday, July 18

After a record-breaking rally, the TSX may extend gains at the open today as firmer metals support miners ahead of…

Read more »

A woman shops in a grocery store while pushing a stroller with a child
Dividend Stocks

1 Consumer Staples Stock That Thrives in Any Economy

Backed by consistent sales and smart expansion, this top consumer staples stock proves why essential businesses can offer stable gains…

Read more »

Stethoscope with dollar shaped cord
Cannabis Stocks

Best Stock to Buy Right Now: Bausch Health vs Canopy Growth?

While both stocks are risky, Bausch Health is seeing operational momentum, while Canopy Growth is still struggling with losses.

Read more »

Dividend Stocks

1 Magnificent Canadian Stock Down 22% to Buy and Hold for Decades

This top TSX stock has increased its dividend annually for the past 29 years.

Read more »