Hub Group (HUBG): Valuation Check as Earnings, Unit Sales and Returns on Capital Continue to Slide

Hub Group (HUBG) is back in focus after two tough years, with earnings per share dropping about 28% annually and unit sales sagging, raising fresh questions about how durable its core profit engines really are.

See our latest analysis for Hub Group.

Even with those pressure points, the stock has staged a sharp near term rebound, with a 1 month share price return of just over 20% and a 3 month share price return above 16%. However, the 1 year total shareholder return is still negative and longer term gains remain more modest, signalling improving momentum rather than a full reset.

Given that shift in sentiment, this can be a good moment to compare Hub Group with other transport names and explore fast growing stocks with high insider ownership for fresh ideas that might have similar upside but stronger underlying trends.

With earnings still sliding, but the shares trading at a sizeable intrinsic discount and lagging their own five year track record, is Hub Group quietly undervalued here, or are investors already paying up for a freight recovery?

Most Popular Narrative: 4.8% Overvalued

With Hub Group closing at $42.77 and the most followed fair value sitting closer to $40.82, the narrative leans toward a mildly stretched valuation, hinging on steady but not explosive freight and logistics recovery.

The analysts have a consensus price target of $39.938 for Hub Group based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $47.0, and the most bearish reporting a price target of just $36.0.

Read the complete narrative.

Want to see what kind of freight recovery justifies this richer earnings multiple and higher margin profile, even with muted growth forecasts and rising risk premiums? Read on.

Result: Fair Value of $40.82 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent intermodal softness and rising digital competition could undercut volume growth and margins, which may challenge the case for a higher and more durable earnings multiple.

Find out about the key risks to this Hub Group narrative.

Another View: Cash Flows Tell a Different Story

While the consensus target suggests Hub Group is about 4.8% overvalued, our DCF model points the other way, with fair value closer to $66.60 versus the current $42.77, implying the stock could be materially undervalued if those long term cash flow assumptions hold up.

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 Hub Group 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 908 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 Hub Group Narrative

If you see the story differently or want to dig into the numbers yourself, you can build a custom view in minutes, Do it your way.

A good starting point is our analysis highlighting 2 key rewards investors are optimistic about regarding Hub Group.

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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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