FedEx Freight Holding Company (FDXF) Looks Cheap After A Sharp Three Month Slide

FedEx Freight Holding Company (FDXF) has drawn fresh attention after recent trading left the share price at $115.65, with the stock down about 10% over the past month and 23% over the past 3 months.

That recent slide comes after a softer stretch, with the 30 day share price return down 10.4% and the 90 day share price return down 22.7%. FedEx Freight Holding Company’s short term bounce of a 4.5% 7 day share price return hints at fading momentum rather than a firm reversal.

Scan FedEx Freight Holding Company alongside a curated 27 high quality undervalued stocks list of companies that have also been marked by recent share price pressure, yet still screen well on quality fundamentals.

Bulls point to FedEx Freight Holding Company trading below some valuation estimates and posting current revenue and net income figures that look solid. Bears see a falling chart and question whether that discount is deserved.

Price-to-Earnings of 26.4x: Is it justified?

Valuation work flags FedEx Freight Holding Company as screened cheaply against some benchmarks, with a P/E of 26.4x versus a peer average of 69.8x while the stock closed at $115.65.

The P/E multiple compares what investors are paying today for each dollar of current earnings. For a freight operator like FedEx Freight Holding Company that reports both revenue and net income figures, this ratio gives a simple gauge of how the market is pricing those earnings relative to similar transportation businesses.

Here, the picture is clear. The share trades on a P/E that is far below both the peer group on 69.8x and the broader US Transportation industry on 31x. This points to the market assigning a lower earnings valuation multiple than those reference points. On top of that, the SWS DCF model estimates the future cash flow value at $153.22 per share, which is above the current price and is used as further support for the idea that the current earnings multiple could be conservative.

The comparison with the DCF work is important because it relies on projected cash flows discounted back to today, rather than just one year of profit. Given that FedEx Freight Holding Company earnings are forecast to grow 15.1% per year, although at a pace flagged as slower than the broader US market, a lower than peer P/E together with a DCF value above the latest close is interpreted as suggesting that investors are not paying up for those projected profits in the same way they are for many competitors.

See what the numbers say about this price — find out in our valuation breakdown..

Result: Price-to-Earnings of 26.4x.

Still, the recent 3 month share price slide, along with any shift in freight demand or pricing power, could quickly challenge the idea that FedEx Freight Holding Company is simply mispriced.

Find out about the key risks to this FedEx Freight Holding Company narrative.

Another View on FedEx Freight Holding Company’s Value

There is a second lens to price FedEx Freight Holding Company. Our DCF model points to a future cash flow value of $153.22 per share, compared with the current $115.65 level. This indicates that the stock is trading at a discount to that cash flow estimate.

That gap suggests investors are either applying a hefty margin of safety to FedEx Freight Holding Company or questioning the durability of the forecasts. The question for you is whether that difference appears to be mispricing or a fair cushion against execution and freight cycle risks.

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out FedEx Freight Holding Company for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 27 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

Uneasy about whether the caution and optimism around FedEx Freight Holding Company are balanced correctly right now? Move quickly, review the underlying metrics, and then ground your own stance in the 2 key rewards and 4 important warning signs.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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