Hub Group trades at $47.48 and has moved in lockstep with the market. Its shares have returned 13.2% over the last six months while the S&P 500 has gained 11.7%.
Is now the time to buy Hub Group, 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 Hub Group Will Underperform?
We’re sitting this one out for now. Here are three reasons you should be careful with HUBG, plus one stock we’d rather own.
1. Long-Term Revenue Growth Disappoints
A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Unfortunately, Hub Group’s 1.6% annualized revenue growth over the last five years was sluggish. This was below our standards.
2. EPS Took a Dip Over the Last Two Years
While long-term earnings trends give us the big picture, we also track EPS over a shorter period because it can provide insight into an emerging theme or development for the business.
Sadly for Hub Group, 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. New Investments Fail to Bear Fruit as ROIC Declines
ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
Unfortunately, Hub Group’s ROIC has decreased significantly over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.
Final Judgment
Hub Group doesn’t pass our quality test. That said, the stock currently trades at 24.9× forward P/E (or $47.48 per share). This multiple tells us a lot of good news is priced in - we think there are better opportunities elsewhere. Let us point you toward an all-weather company that owns household favorite Taco Bell.
Stocks We Would Buy Instead of Hub Group
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