J.B. Hunt Stock Valuation Model

Edited by Juna Yanoyan

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The model rates stocks from 1 to 10, with 10 being the best through a system of advanced mathematics to determine a stock’s expected risk and return. I am using different fundamental and technical factors in order to rank a stock.

Intrinsic value of the stock

Investors should buy stocks selling at a discount to their intrinsic value. Then, they should wait for the fair value of their investments to be realized.

JBHT intrinsic value is $44.00 the current price is $55.20,

Financials

The financial health of the company the higher the better.

Sentiment

It is the investor’s sentiment for the stock.

Analyst ratings

The model assigns a value according to analyst’s recommendation for the stock.

Earnings Consistency

According to this model, each year’s EPS numbers should be better than the previous year’s. One dip is allowed, but the following year’s earnings should be a new high. JBHT, annual EPS before extraordinary items for the last 5 years (from earliest to the most recent fiscal year) were 1.55, 1.56, 1.05, 1.56, 2.11, is acceptable.

Total Debt/Equity

The company must have a low Debt/Equity ratio, which indicates a strong balance sheet. The Debt/Equity ratio should not be greater than 20% or should be less than the average Debt/Equity for its industry.

JBHT Total Debt/Equity of 95.26% is very high but lower than the industry’s average.

Quarterly EPS Change (This Quarter VS. Same Quarter Last Year)

The EPS growth for this quarter relative to the same quarter a year earlier is above the minimum 18% that this model likes to see for a “good” growth company.

JBHT EPS for the past two quarters this year is 0.56 to 0.67.

Annual Earnings Growth

This model looks for annual earnings growth above 12% but prefers higher than 20%.

JBHT annual earnings growth rate over the past five years is 7.80%, so below our target growth.

Current Price Level

Investors should keep an eye open for stocks that are trading within 10% of their 52-week highs, as it is likely to continue in its upward trend.

JBHT 52 week high is $61.18 current price is $55.20

P/E Ratio

The Price/Earnings (P/E) ratio, based on the greater of the current PE or the PE using average earnings over the last 3 fiscal years, must be “moderate”, which in this model states is not greater than 15. Stocks with moderate P/Es are more defensive by nature.

The company has a P/E ratio of 22.81, well above the average industry P/E ratio of 16.23 and above the S&P 500 P/E ratio of 17.7

Insider Ownership

When there is strong insider ownership which I define as 12% or more, management is more likely to act in the best interest of the company, as their interests are right in line with that of the shareholders.

Insiders own 23.12% of JBHT stock. Management’s representation is not large enough. This satisfies the minimum requirement, and companies that do pass this test are more attractive.

Technical Analysis

I am using several technical indicators (MACD, RSI, MFI, position Indicators) to forecast the trend of the stock for 6 and 12 months, and assign a value.

Our balanced scorecard on JBHT: