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Despite Momentum, This Automotive Company Is Still A Bargain Stock

by | Oct 29, 2021 | Stock Picks

TravelCenters of America (TA) Company Overview & Stock Price Forecast

This article provides a brief analysis and stock rating for TravelCenters of America (TA) including an updated stock price target. Additional data on the company’s earnings yield, price/earnings ratio, return on invested capital and YTD performance are discussed as well.

TravelCenters of America Fundamentals

TA Stock Rating

Stock Price Target: $68.49

In the section below, we discuss the earnings yield, P/E, return on invested capital and YTD performance for TravelCenters of America in comparison to the Automotive Retail industry and the S&P 500.

TravelCenters of America is a Small Cap company with a Market Cap of $809.3M.

How are investors using TravelCenters of America earnings yield to assess the company?

TravelCenters (TA stock)_ Earnings Yield in Comparison to the Automotive Retail Industry, S&P 500 and 10 Year Treasury Rate

The earnings yield is used to show the percentage of a company’s earnings per share. Investors typically use earnings yield to determine which assets are underpriced or overpriced relative to other variables, like sector, industry or bond yields. Simply put, the earnings yield of a company can be used to assess how expensive a company is in relation to the earnings that are generated. When valuing companies, the SIS Research Group does not utilize the inverse P/E ratio to calculate the earnings yield. Instead, we use an adjusted earning yield calculation to capture variation amongst companies (i.e. debt and tax rates).

The current earnings yield for TravelCenters of America is 36.10%%, in comparison to 3.49% for the S&P 500 and 1.66% for the 10-year treasury bond. The median earnings yield for the Automotive Retail industry is 5.73%.

What does TravelCenters of America Price-to-Earnings Ratio (P/E) tell investors about the company?

TravelCenters (TA)_ Price-to-Earnings, Price-to-Sales and Price-to-Book Value in Comparison to the Automotive Retail Industry and the S&P 500

The price-to-earnings ratio (P/E) is a relatively popular metric used by investors and analysts for valuing a company’s stock. The P/E ratio can be used to show how a stock’s valuation compares to other companies and the total market. Investors use the P/E ratio to determine what the market is willing to pay today based on a company’s past or future earnings. A high P/E ratio could mean that a stock’s price is too high relative to earnings, which could be a signal that a stock is currently overvalued. In turn, a low P/E ratio could indicate that a company’s current stock price is low relative to earnings. 

TravelCenters of America is currently trading at a P/E of 29.36. The P/E for the Automotive Retail industry is 17.52 and the P/E for the S&P 500 is 28.63.

What is the current Price-to-Sales Ratio (P/S) for TravelCenters of America?

The Price-to-Sales Ratio (P/S) looks at a company’s market cap and revenue to determine valuation. The P/S ratio is calculated by taking a company’s market cap and dividing by the total sales or revenue. The P/S ratio gives an idea of how much the market values every dollar of a company’s sales and can be effective in valuing unprofitable growth stocks or companies that are currently undergoing special situations or challenges. A lower the P/S ratio can be an indicator of good value.

TravelCenters of America is currently trading at a P/S of 0.12. The P/S for the Automotive Industry industry is 0.86 and the P/S for the S&P 500 is 3.11.

How does TravelCenters of America Price-to-BookRatio (P/B) compare to the Automotive Retail industry?

Price-to-book value (P/B) is the ratio of the market value of a company’s shares divided by its book value of equity (the value of it’s assets on the books). The book value is the difference between the book value of assets and liabilities. Typically, investors use the P/B ratio to assess if a stock is valued properly (a value of one means that the stock price is trading in line with the book value of the company). A company with a high P/B ratio could mean the stock price is overvalued as well as the converse.

TravelCenters of America P/B ratio is 1.20. The P/B for the Automotive Retail industry is 5.99 and the P/B for the S&P 500 is 4.84.

How attractive is TravelCenters of America Return on Invested Capital (ROIC) to investors?

TravelCenters (TA)_ Return on Invested Capital in Comparison to the Automotive Retail Industry and the S&P 500

Investors use the return on invested capital (ROIC) to assess how efficient a company is at turning capital into profits. The ROIC is the amount of money a company makes on it’s investments that is above the average cost of debt and equity.

Investors can use the ROIC to provide context for metrics like the (P/E) ratio. For instance, when used in isolation a low P/E ratio could suggest a company is oversold but the decline could be because a company is no longer generating value for shareholders. Conversely, companies that consistently generate high rates of ROIC can plausibly trade at a premium compared to other stocks, even if their P/E ratios are high.

TravelCenters of America ROIC is currently 0.90% in comparison to 10.10% for the Automotive Retail industry and 8.60% for the S&P 500.

What is TravelCenters of America YTD Performance in comparison to its industry and the total market?

The year-to-date (YTD) performance is the amount of profit/loss realized by a stock since the first trading day of the current calendar year. 

The YTD performance for TravelCenters of America is 64.79%. The Automotive Retail industry has a YTD performance of 23.64% in comparison to the YTD S&P 500 performance of 21.19%.

TravelCenters (TA)_ YTD Performance in Comparison to the Automotive Retail Industry and the S&P 500

Recent Financial Results

  • Net Income of $28.9M (up $26.8M over the prior year)
  • Net income per share of common stock of $2.02, an improvement of $1.76 from previous year
  • EBITDA of $192.35M
  • Cash and cash equivalents of $583.3M, revolving credit facility of $98.4M for total liquidity of $681.7 million as of June 2021
  • In April 2021, TA completed the sale of its Quaker Steak & Lube

Stock Price Target: $68.49

Company Overview

TA Stock Rating

TravelCenters of America operates travel centers and standalone restaurants in the US and Canada. Its travel centers offer a range of products and services, including diesel fuel and gasoline, diesel exhaust fluid, and truck repair and maintenance, and roadside services. Many centers also operate restaurants and various customer amenities.

As 2021, the company operated 273 travel centers under it’s various brand names in the US and Ontario, Canada, 42 standalone restaurants in 12 states in the US, and 3 standalone truck service facilities.

TravelCenters of America was founded in 1972 and is based in Westlake, Ohio. The current CEO is Jon Pertchik.

Be sure to add TravelCenters of America (TA stock) to your Watch List and if you haven’t done so already, check in on the performance of our Current Portfolio. Keep it simple and always do your due diligence.

This material is provided for informational purposes only and is not financial advice. The information contained herein should not solely be used for the formation of an investment decision, whether you are a long term or short term investor.