What a brutal six months it’s been for ArcBest. The stock has dropped 34.7% and now trades at $71.76, rattling many shareholders. This might have investors contemplating their next move.
Is there a buying opportunity in ArcBest, or does it present a risk to your portfolio? Get the full stock story straight from our expert analysts, it’s free.
Even though the stock has become cheaper, we don't have much confidence in ArcBest. Here are three reasons why there are better opportunities than ARCB and a stock we'd rather own.
Why Do We Think ArcBest Will Underperform?
Historically owning furniture, banking, and other subsidiaries, ArcBest (NASDAQ: ARCB) offers full-truckload, less-than-truckload, and intermodal deliveries of freight.
1. Sales Volumes Stall, Demand Waning
Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful Ground Transportation company because there’s a ceiling to what customers will pay.
Over the last two years, ArcBest failed to grow its units sold, which came in at 19,698 in the latest quarter. This performance was underwhelming and implies there may be increasing competition or market saturation. It also suggests ArcBest might have to lower prices or invest in product improvements to accelerate growth, factors that can hinder near-term profitability. 
2. EPS Took a Dip Over the Last Two Years
Although long-term earnings trends give us the big picture, we like to analyze EPS over a shorter period to see if we are missing a change in the business.
Sadly for ArcBest, its EPS declined by more than its revenue over the last two years, dropping 32.1%. This tells us the company struggled to adjust to shrinking demand.
3. New Investments Fail to Bear Fruit as ROIC Declines
A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity).
We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, ArcBest’s ROIC has unfortunately decreased. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.
Final Judgment
We see the value of companies helping their customers, but in the case of ArcBest, we’re out. After the recent drawdown, the stock trades at 9.5× forward price-to-earnings (or $71.76 per share). While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are more exciting stocks to buy at the moment. We’d suggest looking at a safe-and-steady industrials business benefiting from an upgrade cycle.
Stocks We Like More Than ArcBest
The elections are now behind us. With rates dropping and inflation cooling, many analysts expect a breakout market - and we’re zeroing in on the stocks that could benefit immensely.
Take advantage of the rebound by checking out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Comfort Systems (+751% five-year return). Find your next big winner with StockStory today for free.
