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small-cap

Should Investors Make an Exit From This Freight Carrier Stock – USX

Feb 11, 2022 | Team Kalkine
Should Investors Make an Exit From This Freight Carrier Stock – USX

U.S. Xpress Enterprises, Inc. 

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U.S. Xpress Enterprises, Inc.(NYSE: USX) is a freight carrier based in the United States. Through its non-asset-based truck brokerage network, the company provides various services using its own truckload fleet and third-party carriers. It operates in two segments: truckload and brokerage. The Truckload segment accounts for the majority of the company's revenue. 

Why Should Investors Exit? 

  • Leveraged Balance Sheet: As of December 31, 2021, the company had cash & cash equivalents of USD 5.70 million and total debt (including finance leases) of USD 375.15 million. This demonstrates the company's increased exposure to balance-sheet risk. 
  • Decline in Cash Flow From Operating Activity: Due to a considerable decrease in the bottom line, the company reported a reduction in operating cash inflow toUSD 78.57 million in FY21 (December 31, 2021) from USD 150.89 million in FY20. 
  • Fall in Operating Income: The company recorded a reduction in operating income to USD 18.43 million in FY21 (ended December 31, 2021) from USD 43.55 million in FY20. Furthermore, net income fell to USD 11.14 million in FY21 from USD 17.63 million in FY20. 
  • Technical Weakness: On the daily chart, USX prices are maintaining their position below the downward sloping trend line, which is acting as resistance. Furthermore, the RSI (14-period) momentum oscillator is trading at~38.71, indicating that the stock is approaching oversold territory. However, the stock is trading below the trend-following indicators 21-period and 50-period SMA, which could operate as a resistance barrier. The stock's critical support level is set at USD 2.65, while the key resistance level is set at USD 5.85. 

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation 

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(Analysis by Kalkine Group) 

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

 

Stock Recommendation:  

USX's share price has fallen 50.67% in the past six months and is currently leaning towards the lower end of its 52-week range of USD 4.05 to USD 12.33. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 3.33. 

Considering the company's leveraged balance sheet, bottom line stress, further decline in operating cash flows, and current valuation, we recommend a "Sell" rating on the stock at the closing price of USD 4.42, up 3.27% as of February 09, 2022. 

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 Three-Year Technical Price Chart (as of February 09, 2022). Analysis by Kalkine Group 

 

* The reference data in this report has been partly sourced from REFINITIV. 

* All forecasted figures and industry information have been taken from REFINITIV.