Critical Analysis: Covenant Transportation Group (CVTI) and Werner Enterprises (NASDAQ:WERN)

Werner Enterprises (NASDAQ: WERN) and Covenant Transportation Group (NASDAQ:CVTI) are both transportation companies, but which is the better stock? We will contrast the two businesses based on the strength of their earnings, risk, valuation, institutional ownership, profitabiliy, analyst recommendations and dividends.

Analyst Recommendations

This is a summary of current ratings for Werner Enterprises and Covenant Transportation Group, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Werner Enterprises 2 7 1 0 1.90
Covenant Transportation Group 0 3 1 0 2.25

Werner Enterprises currently has a consensus target price of $26.00, suggesting a potential downside of 12.01%. Covenant Transportation Group has a consensus target price of $21.00, suggesting a potential upside of 23.60%. Given Covenant Transportation Group’s stronger consensus rating and higher probable upside, analysts clearly believe Covenant Transportation Group is more favorable than Werner Enterprises.

Volatility and Risk

Werner Enterprises has a beta of 0.87, meaning that its stock price is 13% less volatile than the S&P 500. Comparatively, Covenant Transportation Group has a beta of 1.66, meaning that its stock price is 66% more volatile than the S&P 500.

Institutional & Insider Ownership

66.4% of Werner Enterprises shares are held by institutional investors. Comparatively, 63.1% of Covenant Transportation Group shares are held by institutional investors. 34.8% of Werner Enterprises shares are held by company insiders. Comparatively, 35.4% of Covenant Transportation Group shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Profitability

This table compares Werner Enterprises and Covenant Transportation Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Werner Enterprises 3.70% 7.61% 4.29%
Covenant Transportation Group 1.92% 5.65% 2.14%

Valuation and Earnings

This table compares Werner Enterprises and Covenant Transportation Group’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Werner Enterprises $2.03 billion 1.05 $317.40 million $1.03 28.69
Covenant Transportation Group $673.05 million 0.46 $99.02 million $0.72 23.60

Werner Enterprises has higher revenue and earnings than Covenant Transportation Group. Covenant Transportation Group is trading at a lower price-to-earnings ratio than Werner Enterprises, indicating that it is currently the more affordable of the two stocks.

Dividends

Werner Enterprises pays an annual dividend of $0.28 per share and has a dividend yield of 0.9%. Covenant Transportation Group does not pay a dividend. Werner Enterprises pays out 27.2% of its earnings in the form of a dividend.

Summary

Werner Enterprises beats Covenant Transportation Group on 10 of the 15 factors compared between the two stocks.

Werner Enterprises Company Profile

Werner Enterprises, Inc. is a transportation and logistics company. The Company is engaged in transporting truckload shipments of general commodities in both interstate and intrastate commerce. It operates through two segments: Truckload and Werner Logistics. It provides logistics services through its Werner Logistics division. As of December 31, 2016, it had a fleet of approximately 7,100 trucks, of which 6,305 were company-operated and 795 were owned and operated by independent contractors. Its Werner Logistics division operated 74 intermodal drayage trucks as of December 31, 2016. Its Truckload segment comprises the One-Way Truckload and Specialized Services units. It operates in several provinces of Canada to provide through-trailer service into and out of Mexico. Its Werner Logistic segment is a non-asset-based transportation and logistics provider and comprises four operating units: truck brokerage, freight management, the intermodal and Werner Global Logistics international.

Covenant Transportation Group Company Profile

Covenant Transportation Group, Inc. is a provider of expedited long haul freight transportation, primarily using two-person driver teams in transcontinental lanes. The Company’s services also include refrigerated, dedicated, cross-border, regional and brokerage. The Company’s segments include Truckload and Other. The Truckload segment includes the operations of Covenant Transport, Inc. (Covenant Transport), its flagship operation, which provides expedited long haul, dedicated, temperature-controlled and regional solo-driver service; Southern Refrigerated Transport, Inc. (SRT), which provides primarily long haul, regional, dedicated and intermodal temperature-controlled service, and Star Transportation, Inc. (Star), which provides regional solo-driver and dedicated services, primarily in the southeastern United States. The Company provides truckload transportation services throughout the continental United States, into and out of Mexico, and into and out of portions of Canada.

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