Why TFI International Stock Doubled in 2021

TFI International stock (TSX:TFII)(NYSE:TFII) doubled this year alone and more than doubled before the recent pullback. So, is it still a good investment?

| More on:
grow dividends

Image source: Getty Images

Shares of TFI International (TSX:TFII)(NYSE:TFII) are up 100% as of writing, doubling the stock in 2021 alone. TFI stock is up even higher at the year mark, climbing 117% in that time.

However, that doubling comes with a recent pullback. Shares were up 123% back in early September before the market started to slump on the TSX. However, this could be an excellent time for Motley Fool investors to get in on this top stock.

What happened?

Shares of TFI stock jumped practically overnight back in late January. TFI stock soared 26% from news that the company would be acquiring UPS Freight.

The deal was a slam dunk for TFI stock and investors. Acquiring UPS gave it access to hubs across the United States. The US$800 million all-cash deal gives TFI “unmatched free cash flow” along with “significant growth opportunities,” especially in the field of e-commerce.

Now, the deal gives TFI stock a total of just under 17,000 employees, 235 total terminals, and 7,226 vehicles as of the announcement coming out.

So what?

The deal has to be part of the reason TFI stock became one of the TSX30 top-performing companies. The UPS deal completed in the end of April, so the summer saw a boost from the growth of the company’s capabilities.

In fact, the second quarter for the company yielded record-breaking results. The UPS Freight acquisition allowed for a “stronger-than-anticipated immediate positive impact.” This resulted in operating income jumping by 226% year over year, net income up 398%, and diluted earnings per share up 361%! It was an insane quarter that saw shares jump 15% on top of the lead up growth to the earnings report.

But that’s also the problem. Or at least it was. TFI stock quickly became overvalued in all the excitement. As the TSX today climbed even higher, analysts actually started to cut their potential upside for the company. While analysts still believe the company is worth around $150 per share, it was probably a good time to hold the company to see what happens.

Analysts feared back in September that TFI stock had peaked. While they still believe the company has a lot of growth opportunities from the UPS deal and further mergers and acquisitions, it was time to be careful.

Now what?

Those analysts were right. There are multiple market pullbacks expected during the rest of 2021. COVID-19 is still very much a part of our lives and affects every part of it. But it also cannot be denied that the holiday season is coming. So, whether the pandemic affects it or not, it’s likely TFI stock will see yet another significant boost during the holidays from the e-commerce sector.

Right now, it’s a great time to consider this stock. The average potential upside by analysts is now 17% as of writing to reach that $150 mark. Meanwhile, it trades at a reasonable 19.92 P/E ratio and EV/EBITDA of 19.8. So, it’s not valuable but not expensive either.

If you’re a long-term holder, don’t let today’s market movement scare you off. TFI stock has a solid future on the TSX today after this UPS deal. And Motley Fool investors should continue to have it on their watchlists.

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 Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

More on Coronavirus