Tuesday, May 31, 2011

Is Mainfreight Worth Ten Bucks a Share?

Mainfreight Ltd [MFT.NZ]has had an absolute stellar ride share price wise over the last year.

Its share price has risen from around $6.25 a year ago to finish trading at $10.05 yesterday. An all-time high. Since March alone the share price has risen around 25% from 8 bucks, 80c of that alone happening over the last 5 trading days.

An investor will have to ask themselves, is this stock overvalued?

The answer for me is yes and no.

Looking at current financial's one would have to say the stock is way overvalued and I agree totally with this. You would have to be a knuckle dragging moron or a dribbling socialist to believe otherwise:

*Price Earnings Ratio (P/E) 38.480
*Earnings per Share (EPS) 0.261
*Net Tangible Assets per share 1.864
*Total Net Div Paid (last full financial year) 0.190
*Div Yield 2.70%
*Market Cap 989,615,360

If one looks at the past history of the company though and its track record of ever increasing revenue and profits - save for the last 2 years during the global economic downturn - one would have to consider that the current share price is one that reflects that past and the market clearly sees potential for more of that historical upside for the future - as do I.

Of course the returns for investors buying at these prices are going to be relatively low - at less than 3% net annually - so buying now at the current share price runs the risk that if and probably when the company doesn't live up to the market's expectations the share price is going to be hammered. This is of course a short term thing, every company has ups and downs and will have disappointing years but with Mainfreight's long positive track record through wise business management and capital use the company is more likely to run the way it always has.

At over $10 per share most investors will see this company as "expensive" but that price is just a reflection of how well management have run the company, especially over the last 2-3 years,which are probably the toughest it has ever encountered.

The caution here is that there is alot of positive market sentiment built into the MFT share price and for good reason, and there probably will be a pullback at some stage but there are good reasons as to why the share price is where it is.

If you are a short term investor stay away from this company, you will get burnt at the current share price. If you are thinking long term, just be patient, the share price will retreat at some stage.

Disc I own MFT shares in the Share Investor Portfolio

Mainfreight @ Share Investor

Read the MFT 2011 FY Presentation

Is Mainfreight Worth 20 Bucks Plus a Share?
Share Price Alert: Mainfreight Ltd 2
Mainfreight's European Acquisition a Good Move
Share Price Alert: Mainfreight Ltd
Investing in the Stockmarket: Timing your Purchase
Stock of the Week: Mainfreight Ltd
Mainfreight Ltd: 2011 1st quarter Profit Analysis
VIDEO: Don Braid with Paul Homes on the Economy
Mainfreight Ltd: Full Year 2010 Profit Analysis
Long Term View: Mainfreight Ltd
Share Investor Interview: Mainfreight's MD Don Braid
Stock of the Week: Mainfreight Ltd
Questions to Mainfreight's MD Don Braid
I'm Buying: Mainfreight Management delivers the goods
Mainfreight Annual Report Packs a Punch
Analysis - Mainfreight Ltd: FY Profit to 31/03/09
Mainfreight VS KiwiRail: The Sequel
Long VS Short: Mainfreight Ltd
Why did you buy that stock? [Mainfreight Ltd]
Mainfreight 2008 Annual report worth reading
KiwiRail will cost Mainfreight
Mainfreight keeps on truckin
A rare breed
Share Investor's 2008 stock picks

Discuss MFT @ Share Investor Forum

c Share Investor 2011


  1. Hi Darren,
    Given that the share price is high do you think that a share split might be on the cards?

  2. I am inclined to think no. Management appear to be of the opinion that they want to see the success of the company reflected in the share price and having a high value share would certainly mark them out from the pack. A split would obviously have the opposite affect. They haven't had a split before as far as I know, since listing in 1996 but they have had two bonus share issues.


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