Stock Analysis

Is Now An Opportune Moment To Examine Knight-Swift Transportation Holdings Inc. (NYSE:KNX)?

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NYSE:KNX
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Knight-Swift Transportation Holdings Inc. (NYSE:KNX), is not the largest company out there, but it saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s examine Knight-Swift Transportation Holdings’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Knight-Swift Transportation Holdings

What Is Knight-Swift Transportation Holdings Worth?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 10.17x is currently trading slightly below its industry peers’ ratio of 10.43x, which means if you buy Knight-Swift Transportation Holdings today, you’d be paying a decent price for it. And if you believe Knight-Swift Transportation Holdings should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. Is there another opportunity to buy low in the future? Since Knight-Swift Transportation Holdings’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What kind of growth will Knight-Swift Transportation Holdings generate?

earnings-and-revenue-growth
NYSE:KNX Earnings and Revenue Growth December 6th 2022

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with a negative profit growth of -15% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Knight-Swift Transportation Holdings. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? KNX seems priced close to industry peers right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on KNX, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on KNX for a while, now may not be the most advantageous time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystallize your views on KNX should the price fluctuate below the industry PE ratio.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. At Simply Wall St, we found 1 warning sign for Knight-Swift Transportation Holdings and we think they deserve your attention.

If you are no longer interested in Knight-Swift Transportation Holdings, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

What are the risks and opportunities for Knight-Swift Transportation Holdings?

Knight-Swift Transportation Holdings Inc., together with its subsidiaries, provides truckload transportation services in the United States, Mexico, and Canada.

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Rewards

  • Price-To-Earnings ratio (12.9x) is below the US market (15.5x)

  • Earnings have grown 12.2% per year over the past 5 years

Risks

  • Earnings are forecast to decline by an average of 1.1% per year for the next 3 years

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1Y Return

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Knight-Swift Transportation Holdings

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