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FedEx Stock: Oversold, Undervalued

Stock MarketsOct 04, 2021 07:31PM ET
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© Reuters. FedEx Stock: Oversold, Undervalued

FedEx (NYSE:FDX) is a U.S. multinational courier service, which has gained much prominence with the growth of e-commerce.

I am bullish on the stock. (See FedEx stock charts on TipRanks)

Oversold Territory

FedEx is in oversold territory with an RSI reading of 17.1. Anything below 30 is considered oversold, and anything above 70 is considered overbought.

FedEx has been a victim of the pandemic's supply chain disruptions, but if we look at the year-over-year revenue growth (21.2%), investors might be overreacting.

Furthermore, FedEx also has year-over-year EBITDA and normalized net income growth of 66% and 161.6%, respectively. These figures add to existing substance, with FedEx's three-year growth rates of 10.2% and 11.9%.

Balance Sheet Liquidity, Value at Play

Since June 2020, FedEx has managed to decrease its leverage from above the 60% mark to 29.3%. It also increased its interest coverage ratio by an astounding 10.5 times.

Finally, FedEx has also managed to bring down its cost of capital by 45% since 2019, while increasing its ROIC by roughly 5% over the past year, and tangible stock price results are yet to reflect this due to the trendy COVID-19 supply chain disruption sell-off standing in its way.

There's much value at play for investors; FedEx's P/E ratio is currently trading 18.1% below its five-year average.

Furthermore, the stock's price-to-sales and price-to-cash-flow ratios are trading below its sector average by 57.5% and 56.4%, respectively.

FedEx stock holds value in abundance, and investors can rest assured that there's a disconnect between the stock's fair value and the current market price.

Shareholder Value

FedEx stock traded at a negative earnings-per-share in February 2020, but has since bolstered to a ratio worth 14.2.

A stock's price is usually correlated to the EPS, and although FedEx's price did do well in 2020, there's been a complete disconnect between stock price and EPS during 2021, which leaves a critical gap to be filled.

Wall Street's Take

Wall Street thinks FedEx is a Strong Buy, with an average price target of $307.05, which implies upside potential of 40.8%.

Over the last three months, there have been 17 Buy ratings on the stock, with four Hold ratings, and no Dell ratings.

Final Word

FedEx is unjustifiably oversold, and is undervalued due to its strong underlying financial results.

The stock has significant potential upside, and Wall Street agrees.

Disclosure: At the time of publication, Steve Gray Booyens did not have a position in any of the securities mentioned in this article.

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates, and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices or performance.

FedEx Stock: Oversold, Undervalued
 

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Comments (1)
Lee Reynolds
Lee Reynolds Oct 05, 2021 11:27AM ET
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Their very poor service is catching up with them
 
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