Mainfreight (NZSE:MFT): Valuation in Focus Following Earnings Dip and Higher Dividend Announcement

Mainfreight (NZSE:MFT) has just posted its half-year earnings, revealing higher sales but a drop in net income compared to last year. The company also approved an interim dividend at 85 cents per share, which highlights its ongoing focus on rewarding investors.

See our latest analysis for Mainfreight.

Mainfreight’s announcement of a higher interim dividend and solid sales growth appears to have given the market a jolt, with a one-day share price return of 6.8% and a 7-day return of 6.5%. Still, momentum has struggled over the longer term, with a one-year total shareholder return of -10.5% and a flat three-year result. This suggests the stock is recovering from a tough year but has yet to regain its prior trajectory.

If Mainfreight’s rebound caught your attention, now’s a good time to broaden your investing horizons and discover fast growing stocks with high insider ownership

The latest numbers paint a mixed picture for Mainfreight investors. The big question is whether the recent momentum signals genuine value or if the market has already factored in the company’s future growth prospects.

Price-to-Earnings of 23.1x: Is it justified?

Mainfreight currently trades on a price-to-earnings (PE) ratio of 23.1x, which is below the average of its peer group at 27.3x but above the broader global logistics industry average of 16.1x. Relative to its last closing price of NZ$63, the company’s valuation appears attractive when compared to local peers, though less so if global standards are applied.

The price-to-earnings ratio compares a company’s current share price to its per-share earnings. This serves as a quick gauge of whether the market anticipates strong profit growth, stability, or potential risk. For a diversified logistics provider like Mainfreight, a higher PE ratio can reflect market optimism about earnings resilience or expected growth.

Despite challenging market conditions, Mainfreight’s multiple suggests that investors are willing to pay a premium for its quality of earnings, steady profit margins, and demonstrated growth compared to rivals. However, its premium to the global industry PE could signal expectations that may be tested if growth slows. The company’s PE is also below its statistically estimated fair PE of 25.7x, pointing to some upside if Mainfreight can continue outperforming its sector.

Explore the SWS fair ratio for Mainfreight

Result: Price-to-Earnings of 23.1x (UNDERVALUED)

However, slower global trade or rising costs could still challenge Mainfreight’s margins. This may make sustained growth less certain in the months ahead.

Find out about the key risks to this Mainfreight narrative.

Another View: The SWS DCF Model

Looking through a different lens, the SWS DCF model estimates Mainfreight’s fair value at NZ$71.8, which is around 12% above the current share price of NZ$63. This approach factors in future cash flows and suggests Mainfreight could be undervalued if results and growth stay on track.

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 Mainfreight 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 865 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Mainfreight Narrative

If you want to test these ideas for yourself or build an outlook based on your own insights, you can shape your own perspective in just a few minutes, Do it your way

A good starting point is our analysis highlighting 3 key rewards investors are optimistic about regarding Mainfreight.

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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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