Old Dominion Freight Line, Inc.'s (NASDAQ:ODFL) Intrinsic Value Is Potentially 25% Below Its Share Price

Simply Wall St.12-14

Key Insights Old Dominion Freight Line's estimated fair value is US$152 based on 2 Stage Free Cash Flow to Equity Old Dominion Freight Line is estimated to be 32% overvalued based on current share...

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Old Dominion Freight Line is estimated to be 32% overvalued based on current share price of US$201. Analyst price target for ODFL is US$202, which is 33% above our fair value estimate. Today we will run through one way of estimating the intrinsic value of Old Dominion Freight Line, Inc.  by projecting its future cash flows and then discounting them to today's value. Our analysis will employ the Discounted Cash Flow  model. It may sound complicated, but actually it is quite simple!See our latest analysis for Old Dominion Freight Line. Present Value of Terminal Value = TV / 10= U","collect":0,"end_time":0,"defaultTopTitle":"yahoo.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"IE00B3QW5Z07.USD":"GUINNESS GLOBAL MONEY MANAGERS \"C\" (USD) ACC","IE00BGHQF748.EUR":"GUINNESS GLOBAL MONEY MANAGERS \"C\" (EUR) ACC","BK4504":"桥水持仓","BK4232":"货物陆运","SQQQ":"纳指三倍做空ETF","BK4112":"金融交易所和数据","IE00BKPKM429.USD":"NEUBERGER BERMAN GLOBAL SUSTAINABLE EQUITY \"A\" (USD) ACC","IE00B64PRP62.GBP":"GUINNESS GLOBAL MONEY MANAGERS \"C\" (GBP) ACC","TSYW.SI":"TESLA 3xLongSG261006","IE0008368304.USD":"STEWART INVESTORS WORLDWIDE LEADERS SUSTAINABILITY FUND \"I\" (USD) ACC","FCF":"第一联邦金融","QID":"纳指两倍做空ETF","USJW.SI":"ALPHAB 3xLongSG261006","BK4585":"ETF&股票定投概念","BK4533":"AQR资本管理(全球第二大对冲基金)","BK4100":"有线和卫星","BK4211":"区域性银行","BK4566":"资本集团","TQQQ":"纳指三倍做多ETF","ODFL":"Old Dominion Freight Line","LU2095319765.USD":"Natixis Thematics Subscription Economy R/A USD","LU2210150020.SGD":"Natixis Thematics Subscription Economy R/A SGD","TV":"墨西哥电视","LU2210149790.SGD":"Natixis Thematics Subscription Economy R/A SGD-H","BK4588":"碎股","NVIW.SI":"NVDA 3xLongSG261006","PSQ":"纳指反向ETF","USAW.SI":"AMZN 3xLongSG261006","QLD":"纳指两倍做多ETF","DCF":"Dreyfus Alcentra Global Credit Income 2024 Target Term Fund, Inc",".IXIC":"NASDAQ Composite","NDAQ":"纳斯达克OMX交易所","BK4022":"陆运"},"translate_title":"Old Dominion Freight Line,Inc.（纳斯达克股票代码：ODFL）的内在价值可能比其股价低25%","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{".IXIC":1,"TV":1,"NDAQ":1,"FCF":1,"DCF":1,"ODFL":1,"PSQ":0.6,"NVIW.SI":0.6,"QID":0.6,"QLD":0.6,"SQQQ":0.6,"TQQQ":0.6,"TSYW.SI":0.6,"USAW.SI":0.6,"USJW.SI":0.6,"NQmain":0.6,"MNQmain":0.6},"content_text":"Key Insights\n\n Old Dominion Freight Line's estimated fair value is US$152 based on 2 Stage Free Cash Flow to Equity \n Old Dominion Freight Line is estimated to be 32% overvalued based on current share price of US$201 \n  Analyst price target for ODFL is US$202, which is 33% above our fair value estimate \n\n Today we will run through one way of estimating the intrinsic value of Old Dominion Freight Line, Inc. (NASDAQ:ODFL) by projecting its future cash flows and then discounting them to today's value. Our analysis will employ the Discounted Cash Flow (DCF) model. It may sound complicated, but actually it is quite simple! \n Remember though, that there are many ways to estimate a company's value, and a DCF is just one method. For those who are keen learners of equity analysis, the Simply Wall St analysis model here may be something of interest to you. \n See our latest analysis for Old Dominion Freight Line \n Crunching The Numbers \n We're using the 2-stage growth model, which simply means we take in account two stages of company's growth. In the initial period the company may have a higher growth rate and the second stage is usually assumed to have a stable growth rate. To begin with, we have to get estimates of the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. \n A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, so we discount the value of these future cash flows to their estimated value in today's dollars: \n 10-year free cash flow (FCF) forecast \n\n\n\n\n2025\n2026\n2027\n2028\n2029\n2030\n2031\n2032\n2033\n2034\n\n\n Levered FCF ($, Millions) \nUS$911.3m\nUS$1.08b\nUS$1.12b\nUS$1.25b\nUS$1.35b\nUS$1.43b\nUS$1.50b\nUS$1.57b\nUS$1.63b\nUS$1.68b\n\n\nGrowth Rate Estimate Source\nAnalyst x8\nAnalyst x4\nAnalyst x1\nAnalyst x1\nEst @ 7.62%\nEst @ 6.12%\nEst @ 5.07%\nEst @ 4.34%\nEst @ 3.82%\nEst @ 3.46%\n\n\n Present Value ($, Millions) Discounted @ 6.6% \nUS$855\nUS$948\nUS$924\nUS$970\nUS$979\nUS$975\nUS$961\nUS$941\nUS$916\nUS$889\n\n\n\n(\"Est\" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = US$9.4b\n The second stage is also known as Terminal Value, this is the business's cash flow after the first stage. The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 5-year average of the 10-year government bond yield of 2.6%. We discount the terminal cash flows to today's value at a cost of equity of 6.6%. \nTerminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = US$1.7b× (1 + 2.6%) ÷ (6.6%– 2.6%) = US$44b\nPresent Value of Terminal Value (PVTV)= TV / (1 + r)10= US$44b÷ ( 1 + 6.6%)10= US$23b\n The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is US$32b. In the final step we divide the equity value by the number of shares outstanding. Compared to the current share price of US$201, the company appears potentially overvalued at the time of writing. Remember though, that this is just an approximate valuation, and like any complex formula - garbage in, garbage out. \n\n\n\n  NasdaqGS:ODFL Discounted Cash Flow December 14th 2024\n \n\n The Assumptions \n Now the most important inputs to a discounted cash flow are the discount rate, and of course, the actual cash flows. You don't have to agree with these inputs, I recommend redoing the calculations yourself and playing with them. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at Old Dominion Freight Line as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 6.6%, which is based on a levered beta of 0.964. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. \nSWOT Analysis for Old Dominion Freight Line\n\n\nStrength\n\nEarnings growth over the past year exceeded the industry.\n\n\nDebt is not viewed as a risk.\n\n\nBalance sheet summary for ODFL.\n\n\n\nWeakness\n\nEarnings growth over the past year is below its 5-year average.\n\n\nDividend is low compared to the top 25% of dividend payers in the Transportation market.\n\n\nExpensive based on P/E ratio and estimated fair value.\n\n\n\nOpportunity\n\nAnnual earnings are forecast to grow for the next 3 years.\n\n\n\nThreat\n\n Annual earnings are forecast to grow slower than the American market.\n\n\nWhat else are analysts forecasting for ODFL?\n\n\n\n Next Steps: \n Valuation is only one side of the coin in terms of building your investment thesis, and it shouldn't be the only metric you look at when researching a company. It's not possible to obtain a foolproof valuation with a DCF model. Instead the best use for a DCF model is to test certain assumptions and theories to see if they would lead to the company being undervalued or overvalued. If a company grows at a different rate, or if its cost of equity or risk free rate changes sharply, the output can look very different. Can we work out why the company is trading at a premium to intrinsic value? For Old Dominion Freight Line, there are three essential aspects you should assess: \n\n Risks: For example, we've discovered 1 warning sign for Old Dominion Freight Line that you should be aware of before investing here. \n Future Earnings: How does ODFL's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart. \n Other Solid Businesses: Low debt, high returns on equity and good past performance are fundamental to a strong business. Why not explore our interactive list of stocks with solid business fundamentals to see if there are other companies you may not have considered! \n\n PS. Simply Wall St updates its DCF calculation for every American stock every day, so if you want to find the intrinsic value of any other stock just search here.\nHave feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"-1","news_tag":"dataReport","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2491456358"}