Forward Air

Solomon's Select, by Mark Robertson, Managing Partner

Posted on November 1st, 2015

FWRD has been featured often in the Forbes annual listing of the Best Small Companies and was still eligible for this year’s roll call.

Forward Air (FWRD) has been featured often in the Forbes annual listing of the Best Small Companies and was still eligible for this year’s roll call. But the annual sales are approaching $1 billion, so they’ll likely be ineligible soon. This leading logistics services provider scored the highest quality ranking among the hundreds of smaller companies explored for our published collection. Combine that with a return forecast in double digits and FWRD is our featured company for November 2015.

Forward Air provides scheduled ground transportation and related logistics services to the North American air freight and expedited less-than-truckload market. Services are a cost effective alternative to air transportation. The company has a network of freight terminals located on or near airports in 85 U.S. and Canadian cities.

Forward Air (FWRD): Business Model Analysis. Forward Air finished at the top of the 50 Best Small Companies ranking for a reason. The performance is steady and consistent in a very competitive logistics and delivery industry group. Double-digit top line growth combines with steady high single-digit margins to produce a superior return forecast. We can also consider the company to be recession-tested. See 2009 dip in earnings.

Growth, Profitability, Valuation

The growth rate forecast (based on 2009-2019) is 13.2%. Based on the visual analysis of the business model, 12% or higher, seems feasible. Value Line is using 10% for the 3-5 year growth rate forecast.

2014 delivered a net margin of 7.8% versus a 7-year trailing average of 7.6%. Margins could trend higher but would be impacted if recessionary conditions worsen. Value Line has a long-term forecast of 8.5% for net margin.

The P/E ratio has been fairly steady over the years. We’re using 21x for the long-term projected average P/E, in line with Value Line. The analyst consensus ranges from 17-22x, reflecting the historical consistency.

The market climate is challenging for freight truckers and comparisons versus companies like C.H. Robinson (CHRW) and Expeditors International (EXPD) probably have some merit. Forward Air weathered the 2008-2009 challenge of the Great Recession and the steady profitability in the face of economic turbulence is a definite positive in the management evaluation.


Mark Robertson

Mark Robertson is founder and managing partner of Manifest Investing, a source for research and portfolio management focusing on strategic long term investors.

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