Knight-Swift Transportation trades at $68.44 and has moved in lockstep with the market. Its shares have returned 13.8% over the last six months while the S&P 500 has gained 8.9%.
Is now the time to buy Knight-Swift Transportation, or should you be careful about including it in your portfolio? Get the full stock story straight from our expert analysts, it’s free.
Why Do We Think Knight-Swift Transportation Will Underperform?
We’re passing on Knight-Swift Transportation for now. Here are three reasons why there are better opportunities than KNX, plus one stock we’d rather own.
1. Revenue Growth Flatlining
Long-term growth is the most important, but within industrials, a stretched historical view may miss new industry trends or demand cycles. Knight-Swift Transportation’s recent performance shows its demand has slowed as its revenue was flat over the last two years. 
2. EPS Trending Down
Analyzing the long-term change in earnings per share (EPS) shows whether a company’s incremental sales were profitable — for example, revenue could be inflated through excessive spending on advertising and promotions.
Sadly for Knight-Swift Transportation, its EPS declined by 17.5% annually over the last five years while its revenue grew by 9%. This tells us the company became less profitable on a per-share basis as it expanded.
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).
Unfortunately, Knight-Swift Transportation’s ROIC has decreased over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.
Final Judgment
We see the value of companies helping their customers, but in the case of Knight-Swift Transportation, we’re out. That said, the stock currently trades at 21.2× forward P/E (or $68.44 per share). While this valuation is fair, the upside isn’t great compared to the potential downside. There are more exciting stocks to buy at the moment. We’d suggest looking at one of Charlie Munger’s all-time favorite businesses.
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