TFI International (TSX:TFII) is a growth stock that seems to be immune to the ongoing market downturn. While the TSX today is down by about 8% from 52-week highs, TFI stock is up 50% in the last year!
Yet in the last few months, TFI stock has started to waver. So, is now the right time to get in on the stock? Or is it due for a dip?
Heading high then falling
It looks like the reason for the slight dip recently in TFI stock actually comes down to some positive news. The news came from the company’s fourth-quarter results, which also saw positive guidance for 2023. It now expects earnings per share (EPS) to come in at between $7.50 and $7.60, which is above the prior consensus of between $7.37 and $7.40. This also doesn’t include any mergers, acquisitions, or share repurchases.
And that’s an important note, given management expects to complete about $300 million in mergers and acquisition deals, all before June 2023. What’s more, management has historically provided guidance that comes in quite conservative, so it could definitely top its guidance.
While this sent shares up, it looks like investors then dug in a bit deeper. TFI stock reported earnings before interest, taxes, depreciation, and amortization (EBITDA) of US$305 million. This was above estimates but still came in a bit light.
Mergers on the way
The fourth quarter also brought up some questions regarding future mergers and acquisitions. There were several noted by analysts that could certainly bring about synergies and increased “density,” in the words of one analyst.
And TFI stock certainly has the balance sheet that could handle more mergers, even in this rough environment. As the recession comes closer, companies continue to seek out the stock to reduce costs. Instead of using their own freights, they use this company and no longer have the transportation to worry about.
This also creates long-term value for investors, as transportation through freight trucking rather than rail seems to be the best mode to ship products still throughout North America. And this fact does not depend on market conditions, with consumers continuing to demand quick, within-a-week delivery of most products.
Analysts therefore increased their price targets for TFI stock again and again. It’s been touted as a buy, but one that is slowly but surely reaching its potential price target.
To buy or not to buy?
At the Motley Fool, we recommend that companies are held long term. In the case of TFI stock, it certainly has a strong long-term hold appeal. Shares may be up 50%, but the recent dip could be a solid time to get in after some investors received their returns after a huge jump from earnings.
The stock continues to trade in value territory at 12.7 times earnings and holds a nice, little 1.23% dividend yield as of writing. And while 50% is certainly a lot, the stock is up 681% in the last decade. So, there certainly could be more to come.