Transportation and Logistics Markets on the Upswing

Transportation and Logistics Markets on the Upswing

Tuesday, November 19, 2024

Current public T&L company valuations are attractive. Click to view more.

As we see more data points that the worst of the freight recession is behind us, valuations of transportation & logistics (“T&L”) companies are near the highest point they have been in years. Although profitability of these companies has yet to demonstrate a clear positive inflection, recent increases in valuations tells us that investors are confident that profits will soon be much higher than they are today. Our snapshot of the current market shows:

  • Current share prices for transportation & logistics (“T&L”) companies have increased an average of 24% versus one year ago and 15% from three years ago, in a freight market far better than we find ourselves in today
  • Additionally, share prices are not only near the highest point over the past year, but not far off the highest points over the past five years, which includes the period of freight market euphoria following the Covid outbreak
  • Company valuations measured as a multiple of last-twelve month (“LTM”) EBITDA are also well above the levels from three years ago

What implications does this have on the M&A markets? We believe that increasing investor confidence will ultimately lead to higher M&A volumes. Companies with higher valuations can fund acquisitions with less dilution. Banks and debt financing sources are more likely to lend capital on a stronger credit profile. Acquirers with a positive outlook have more confidence that an acquisition is likely to become value accretive. And, more buyers coming to the table leads to more competition for companies for sale and thus results in higher sale prices.

While the public markets are not always right, it does provide a “market efficient” barometer of investor confidence in the freight market upswing. And, the barometer is clearly saying that stronger freight markets are right around the corner.

If you have any questions about valuations and M&A in the current markets, reach out to us to set up time to discuss your situation.

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