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Covenant Logistics Group, Inc. (CVLG) Soars to 52-Week High, Time to Cash Out?

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Have you been paying attention to shares of Covenant Logistics (CVLG - Free Report) ? Shares have been on the move with the stock up 36.4% over the past month. The stock hit a new 52-week high of $34.8 in the previous session. Covenant Logistics has gained 28.2% since the start of the year compared to the -12.7% move for the Zacks Transportation sector and the -20.1% return for the Zacks Transportation - Truck industry.

What's Driving the Outperformance?

The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on July 25, 2022, Covenant Logistics reported EPS of $1.63 versus consensus estimate of $1.36 while it beat the consensus revenue estimate by 9.9%.

For the current fiscal year, Covenant Logistics is expected to post earnings of $4.58 per share on $1.16 billion in revenues. This represents a 26.87% change in EPS on a 10.65% change in revenues. For the next fiscal year, the company is expected to earn $3.14 per share on $1.12 billion in revenues. This represents a year-over-year change of -31.44% and -2.9%, respectively.

Valuation Metrics

Covenant Logistics may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.

On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.

Covenant Logistics has a Value Score of A. The stock's Growth and Momentum Scores are B and D, respectively, giving the company a VGM Score of A.

In terms of its value breakdown, the stock currently trades at 7.4X current fiscal year EPS estimates, which is not in-line with the peer industry average of 11.5X. On a trailing cash flow basis, the stock currently trades at 4.9X versus its peer group's average of 6.5X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Covenant Logistics currently has a Zacks Rank of #1 (Strong Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Covenant Logistics meets the list of requirements. Thus, it seems as though Covenant Logistics shares could still be poised for more gains ahead.

How Does CVLG Stack Up to the Competition?

Shares of CVLG have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Forward Air Corporation (FWRD - Free Report) . FWRD has a Zacks Rank of # 2 (Buy) and a Value Score of C, a Growth Score of A, and a Momentum Score of A.

Earnings were strong last quarter. Forward Air Corporation beat our consensus estimate by 0.99%, and for the current fiscal year, FWRD is expected to post earnings of $6.73 per share on revenue of $2 billion.

Shares of Forward Air Corporation have gained 8.6% over the past month, and currently trade at a forward P/E of 14.57X and a P/CF of 16.39X.

The Transportation - Truck industry is in the top 3% of all the industries we have in our universe, so it looks like there are some nice tailwinds for CVLG and FWRD, even beyond their own solid fundamental situation.

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