USA Truck, Inc.

USAK Details

USA Truck, Inc. (NASDAQ: USAK) provides transportation and logistics services in the United States, Mexico, and Canada. It offers customized truckload carrier services, dedicated contract carriage, freight management, third-party logistics, and intermodal rail services through its Trucking and USAT Logistics operating segments.

Q2FY21 Results: The company reported a 37.41% rise in net revenue to USD 170.03 million in Q2FY21 (ended June 30, 2021) compared to USD 123.74 million in Q2FY20, resulting from an increase in sales from both segments. The trucking segment, which accounted for 61.67% of the Q2FY21 net revenue, increased by 18.88% YoY, and USAT Logistics grew 103.29% YoY. Net income for Q2FY21 increased to USD 4.19 million in Q2FY21 vs. a net loss of USD 0.93 million reported in Q2FY20. The company exited the quarter with a cash balance of USD 2.01 million, with total debt amounting to USD 138.00 million.

Key Risks:  A small number of USAK's major retail clients account for a significant portion of its freight revenue. Its largest customer represents more than 10% of the USAT Logistics revenue in FY20. Any unfavorable changes in the economic climate that affect these major clients could also harm the company's financial performance. In addition, most of USAK's operating expenses are accounted for by diesel fuel, pricing of which is volatile and unpredictable. Hence, any delays in the supply of the required amount or unfavorable pricing could skew the company's overall performance.

Outlook: In FY24, USAK aims to generate USD 1 billion in consolidated revenues, including USD 400 million in USAT Logistics revenue. Its EPS is estimated to range from USD 4.25 – 4.50, with a trucking operating ratio of 90% – 92%.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

USAK Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: USAK's share price has increased 5.45% in the past three months and is currently leaning towards the lower end of its 52-week range of USD 8.04 to USD 21.89. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is 60.31. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 17.33. Considering the slight uptick in the stock price, robust financials, current valuation, and associated risks, we recommend a "Hold" rating on the stock at the current price of USD 15.87, up 0.19% as of October 12, 2021, 1:25 PM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.