Is it an opportune moment to acquire FedEx stock at a price of $240?
In the ever-changing world of investments, it's essential to keep a close eye on performance and market trends. Two portfolios, in particular, have caught the attention of investors recently - the High Quality Portfolio and the Trefis Reinforced Value (RV) Portfolio.
The High Quality Portfolio, a popular choice among investors, has comfortably outperformed its benchmark, achieving returns exceeding 91% since its inception. On the other hand, the RV Portfolio has also shown promise, outperforming its all-cap stocks benchmark, making it a potential investment option with potentially stronger performance.
However, one company that has faced challenges in recent years is FedEx Corporation. The delivery services giant has seen a decline in revenues, with an average rate of 2.2% over the last 3 years. This trend is reflected in the company's stock performance, which has fared worse than the S&P 500 index during some of the recent downturns, including the COVID-19 Pandemic (2020), the Inflation Shock (2022), and the Global Financial Crisis (2008).
During the Global Financial Crisis, FDX stock fell 71.7% from a high of $120.97 on 23 February 2007 to $34.28 on 9 March 2009, while the S&P 500 declined by 56.8%. The stock fully recovered to its pre-Crisis peak by 16 October 2013. Similarly, during the COVID-19 Pandemic, FDX stock fell 45.1% from a high of $164.91 on 20 February 2020 to $90.49 on 16 March 2020, but recovered to its pre-Crisis peak by 16 July 2020. However, during the Inflation Shock (2022), FDX stock has yet to recover to its pre-Crisis high.
Despite these challenges, FedEx's balance sheet looks relatively fine. The company has a moderate Debt-to-Equity Ratio of 67% and a Cash-to-Assets Ratio of 7.0%. However, its profit margins are much worse than most companies, with an operating income margin of 6.7%, an operating cash flow (OCF) margin of 8.5%, and a net income margin of 4.7%.
The stock has faced significant pressure this year, falling 17% largely due to elevated operating costs. However, the company's current valuation suggests that its weak performance is already priced into the stock, with a trailing earnings multiple of 14, slightly below its five-year average of 15.
On a positive note, FedEx's quarterly revenues grew 2.8% to $22 billion in the most recent quarter from $22 billion a year ago. With revenue growth picking up and management prioritizing margin improvement, the company's fundamentals are starting to align, creating a potential opportunity for the stock to rise.
If you're seeking an upside with less volatility, the High Quality Portfolio might be the way to go. Alternatively, the quarterly rebalanced mix of large-, mid-, and small-cap RV Portfolio stocks provides a responsive way to make the most of upbeat market conditions while limiting losses when markets head south.
In conclusion, while FedEx Corporation has faced challenges in recent years, the company's balance sheet remains relatively strong, and its current valuation suggests that its weak performance is already priced into the stock. Meanwhile, the High Quality Portfolio and the Trefis Reinforced Value (RV) Portfolio continue to outperform their respective benchmarks, offering potential investment opportunities for those seeking stronger performance.
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