Why Cargojet Stock is the Best Deal on the Market

Cargojet stock (TSX:CJT) has had a rough go as of late, but that doesn’t mean long-term investors should ignore this opportunity.

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In a world filled with market volatility and economic uncertainty, finding safe havens for your investment capital becomes paramount. Among the various sectors to consider, defensive stocks offer a cushion against market fluctuations. Today, we’ll shine a spotlight on Cargojet (TSX:CJT). We’ll explore why it could be a huge opportunity in the world of investing.

Why overnight shipping is a huge opportunity

One sector that has been consistently resilient and promises continued growth is the overnight shipping industry. In an era where e-commerce continues to surge, the demand for efficient and rapid delivery services has never been higher. Overnight shipping companies are strategically positioned to capitalize on this trend.

According to industry reports, the global e-commerce market is expected to reach a staggering $6.5 trillion in 2023. This trend is expected to drive increased demand for overnight shipping services. That makes companies like Cargojet prime candidates for investment.

Looking closely at Cargojet stock

Cargojet is a Canadian scheduled cargo airline headquartered in Mississauga, Ontario. The company operates cargo services domestically and internationally and offers full aircraft charters. With a workforce of over 1650 employees, Cargojet is a robust player in the industry.

Cargojet has come a long way since its inception in August 2001. In 2005, the overnight cargo airline became a public company, solidifying its presence in the market. Notably, the company partnered with Canadian rapper Drake in 2019, making him an ambassador for the brand.

Recent moves

Of course, Cargojet stock is far down from its three-digit share price. Cargojet’s management has been proactive in adapting to market conditions. Dr. Ajay Virmani, President and CEO, highlights the company’s focus on cost management, network optimization, and generating free cash flow to navigate the current economic cycle successfully.

The company’s earnings before interest, taxes, depreciation and amortization (EBITDA) margin increased from 32.9% to 35.4% in the most recent quarter. This performance was a testament to the effectiveness of these initiatives.

Dr. Virmani acknowledges the challenges of economic conditions but anticipates a shift in consumer spending towards travel and leisure in the near future. Cargojet’s outstanding 99.6% on-time performance underscores its commitment to reliability and customer service.

Earnings prove ongoing strength

Cargojet’s financials reflect its resilience and potential for long-term growth. In the second quarter of 2023, the company reported total revenues of $209.7 million, with adjusted EBITDA at $74.3 million. Revenues dipped compared to the same period in 2022, yet this can be attributed to specific factors like a fuel surcharge and other revenues.

More importantly, Cargojet’s adjusted free cash flow for the quarter reached $52.3 million, a substantial increase compared to the previous year. Net income for the quarter was $31.1 million, a remarkable achievement despite challenges in the current economic landscape.

Bottom line

In times of market uncertainty, defensive stocks like Cargojet provide investors with a reliable sanctuary for their capital. The overnight shipping industry’s growth potential, driven by the ever-expanding e-commerce sector, ensures a promising future for companies like Cargojet stock.

Cargojet’s history of evolution and adaptability, combined with its recent strategic moves and strong financial performance, make it an attractive investment option. While the current economic conditions remain challenging, air cargo operator is well-positioned to thrive as consumer spending trends shift.

As the world looks to normalize and economic conditions stabilize, Cargojet’s robust fundamentals and resilience position it as a compelling choice for investors seeking safety and growth in their portfolios. In the world of investing, finding a secure haven like Cargojet can be a strategic move for both short-term stability and long-term gains.

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 positions in Cargojet. The Motley Fool has positions in and recommends Cargojet. The Motley Fool has a disclosure policy.

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