Capacity solutions provider USA Truck, Inc. (USAK) recently reported a solid fourth-quarter earnings report, as it yielded its sixth straight quarter of record adjusted earnings per share. The company recently completed a $130 million asset-backed credit facility that provided more predictable equipment valuation and increased borrowing capacity, as well as equipment financing arrangements that secure low-cost fixed interest rates.

The stock has gained 36.7% over the past month to close yesterday’s trading session at $24.38. In addition, it is currently trading 16.2% below its 52-week high of $29.09, which it hit on February 17, 2022. Moreover, the strong freight and pricing market makes its near-term prospects bright.

Here’s what I think could influence USAK’s performance in the upcoming months:

Robust Financials

USAK’s operating revenue increased 26.4% year-over-year to $200.90 million in the fourth quarter ended December 31, 2021. Its adjusted operating income grew 66.9% year-over-year to $16.80 million. Also, its adjusted net income came in at $12.41 million, up 100.8% year-over-year. The company’s adjusted EPS climbed 100% year-over-year to $1.38.

Note that USAK is one of the few stocks handpicked by our Chief Value Strategist, Steve Reitmeister, currently in the POWR Value portfolio. Learn more here.

Favorable Analyst Estimates

For the current quarter ending March 31, 2022, analysts expect USAK’s EPS and revenue to grow 79.1% and 17.1% year-over-year to $0.77 and $185.55 million, respectively. In addition, its EPS is expected to grow at 27.6% per annum over the next five years. Moreover, Wall Street analysts expect the stock to hit $33 in the near term, indicating a potential upside of 35.4%.

High Profitability

In terms of trailing-12-month asset turnover ratio, USAK’s 1.99% is 154.8% higher than the industry average of 0.78%. Likewise, its trailing-12-month ROCE of 25.26% is 84.6% higher than the industry average of 13.68%. Moreover, the stock’s trailing-12-month levered FCF margin and ROTA of 6.38% and 6.80% are higher than the industry averages of 4.52% and 5.17%, respectively.

Lower-than-Industry Valuation

In terms of forward P/S, USAK’s 0.26x is 82.4% lower than the industry average of 1.46x. Likewise, its forward EV/S of 0.47x is 74.1% lower than the industry average of 1.80x. Moreover, the stock’s forward non-GAAP P/E and EV/EBITDA of 6.73x and 4.38x are lower than the industry averages of 17.83x and 11.34x, respectively.

POWR Ratings Show Promise

USAK has an overall rating of A, which equates to a Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by accounting for 118 different factors, with each factor weighted to an optimal degree. 

Our proprietary rating system also evaluates each stock based on eight different categories. Out of these categories, USAK has a B grade for Value, in sync with its lower-than-industry valuation ratios.

USAK also has an A grade for Sentiment and a B grade for Growth. This is justified as analysts expect its EPS and revenue to increase in the upcoming months.

Moreover, the stock has an A grade for Momentum, consistent with its 68.7% gains over the past six months and 75.4% returns over the past year.

Beyond what I have stated above, we have also given USAK grades for Stability and Quality. Get all the USAK ratings here.

USAK is ranked #2 out of 22 stocks in the A-rated Trucking Freight industry.

Bottom Line

USAK reported impressive fourth-quarter results amid supply chain bottlenecks and logistics constraints. Also, It is well-positioned to benefit from the strong demand. Therefore, it looks undervalued at the current price level, and it could be wise to scoop up its shares now.

How Does USA Truck (USAK) Stack Up Against its Peers?

USAK has an overall POWR Rating of A. However, you could also check out these other stocks within the Trucking Freight industry with an A (Strong Buy) rating: P.A.M. Transportation Services, Inc. (PTSI) and Daseke, Inc. (DSKE).

USAK shares were trading at $25.15 per share on Tuesday afternoon, up $0.77 (+3.16%). Year-to-date, USAK has gained 26.51%, versus a -9.53% rise in the benchmark S&P 500 index during the same period.

About the Author: Nimesh Jaiswal

Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...

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