USA Truck, Inc.

USAK Details

USA Truck, Inc. (NASDAQ: USAK) is engaged in transportation and logistics services. The company works in two segments, namely, 1) The Trucking segment, which consists of the company’s truckload and provides steadfast shipping services, and 2) The USAT Logistics, which consists of freight, logistics, and rail intermodal services. As of May 3^rd, 2021, the company’s market capitalization stood at USD 144.08 million.

Introduction of USAT CONNECT: As of January 22^nd, 2021, the company introduced a technology platform, USAT CONNECT, that can deliver a robust connected driver experience for road drivers. It provides drivers the ability to book their own freight, load acceptance, and dispatch trip planning.

Shareholders of USAK: As of March 30^th, 2021, the company’s 47.50% stakeholder are Institutions, 24.60% stakeholder is the General Public, 12.40% stakes are held by the Individual Insiders, 9.6% stakes by the Private Companies, and the balance by the Hedge Funds.

Q1FY21 Results: The company reported a 25.03% rise in net revenue to USD 158.50 million in Q1FY21 (ending March 31, 2021) as compared to USD 126.77 million in Q1FY20 (ending March 31, 2020). The Trucking segment contributes 64.84% while the USAT Logistics segment contributes 35.15% of the total revenue in the first three months of FY21. The company reported an increase in net income to USD 3.59 million in Q1FY21 as compared to a loss of USD 2.55 million in Q1FY20. Cash flow from operations stood at USD 5.98 million in Q1FY21 as compared to USD 2.33 million in Q1FY20.

Key Risks: Diesel Fuel is one of the company’s main operating expenses. There are numerous factors that determines the price of diesel fuel. Hence any shortage, change in price, or supply disruption in diesel fuel could materially affect the financial health of the company. Also, the company secures 69.23% and 71.87% of the total revenues from the Trucking segment during the FY20 and FY19 signifying high concentration risk.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

(Data Source: Refinitiv, Thomson Reuters, Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company’s FY21E 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, Thomson Reuters)

Stock Recommendation: USAK has declined by 21.89% in the past 1 month and is currently leaning towards the higher end of the 52-week range of USD 4.00 to USD 21.89. We have valued the stock using the EV/EBITDA based relative valuation methodology and arrived at a target price of USD 19.39. On the technical chart, the next support level is USD 13.20. Considering the correction in the stock price in the past one months, investment by hedge funds, strong institutional holding and decent fundamentals, we recommend a "Speculative Buy" rating on the stock at the closing price of USD 16.23, up by 5.60% as of 03^rd May 2021.

* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once estimated target price is reached or if the price closes below the support level.