TFI International

TFI International Inc earns a 3-star quantitative star rating, illustrating our stance that this share class is a balanced choice, but prudent investors should consider looking elsewhere. The stock currently trades at a 6% discount to our quantitative fair value estimate of $122.04 per share; however, some caution is warranted due to this estimate's medium uncertainty rating. We require the price/fair value ratio to move a certain amount before the star rating can change. This stability-enhancing buffer is in effect for this stock.

The firm's profitability bolsters our estimated valuation. Highly profitable companies are often more resilient in recessions and are likely to generate stronger future cash flows for shareholders. For example, the firm's sales yield of 81.6% ranks in the top 45% compared with peers globally. This company has a robust ability to generate sales without much capital investment, freeing up more capital to be returned to shareholders in the long run. We believe this is a sign that shares could be cheap.

The company's valuation metrics are an additional encouraging factor. A company's valuation metrics provide insights into the market's expectations for its future growth and profitability. The firm's enterprise value to market value ratio of 1.3, for example, lies in the top 40% compared with global peers. While highly leveraged firms can be risky, they can also be highly rewarding. This company's high enterprise value relative to its market value suggests that wise investments will yield outsize returns for investors. This characteristic further promotes our favorable price/fair value ratio.

In addition to the aforementioned drivers, our model considers momentum as part of its comprehensive analysis. This share class has outperformed the broader universe over the past year. While we believe the stock is undervalued, this outperformance had a negative impact on our valuation estimate.

The narrow moat rating for this company indicates investors can expect it to generate 10 years or more of excess returns on capital due to its respectable competitive advantages. In addition, the company's moderate financial health score is decent and doesn't seriously concern us with regard to financial distress.