Shareholders of Universal Logistics would probably like to forget the past six months even happened. The stock dropped 46.5% and now trades at $23.67. This was partly due to its softer quarterly results and may have investors wondering how to approach the situation.
Is now the time to buy Universal Logistics, or should you be careful about including it in your portfolio? Get the full stock story straight from our expert analysts, it’s free.
Why Do We Think Universal Logistics Will Underperform?
Despite the more favorable entry price, we're sitting this one out for now. Here are three reasons why we avoid ULH and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, Universal Logistics grew its sales at a sluggish 3.7% compounded annual growth rate. This was below our standard for the industrials sector. 
2. EPS Took a Dip Over the Last Two Years
Although long-term earnings trends give us the big picture, we like to analyze EPS over a shorter period to see if we are missing a change in the business.
Sadly for Universal Logistics, its EPS declined by more than its revenue over the last two years, dropping 28%. This tells us the company struggled to adjust to shrinking demand.
3. Breakeven Free Cash Flow Limits Reinvestment Potential
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
Universal Logistics broke even from a free cash flow perspective over the last five years, giving the company limited opportunities to return capital to shareholders.
Final Judgment
Universal Logistics falls short of our quality standards. After the recent drawdown, the stock trades at 9.1× forward P/E (or $23.67 per share). While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are better stocks to buy right now. Let us point you toward the most entrenched endpoint security platform on the market.
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