TFI International Inc

TFI International Inc. (TSX: TFII) is engaged in transportation and logistics services across the United States, Canada, and Mexico.

Why Investors Should Book Profit?

• Increase in Leverage: The company’s debt to equity ratio at the end of the June 2021 stood at 1.04x higher than 0.89x reported at the end of the March 2021 quarter and higher than the industry median of 0.48x. This implies higher balance sheet risks.
• RSI Indicating a Potential Consolidation: The leading momentum indicator, the 14-day RSI is hovering in a steeply overbought zone at 76.6, which indicates a potential price consolidation in the stock in the near term.

Technical Price Chart (as on July 30, 2021). Source: REFINITIV, Analysis by Kalkine Group

• Stretched Valuation: From TTM EV/EBITDA multiple standpoints, TFII shares are trading at multiple of 14.5x, whereas industry median TTM EV/EBIDTA multiple stood at 7.04x. This implies that TFII shares are extremely overvalued against the peers.

Stock Recommendation: A resurgence in the COVID-19 delta cases could hit global equity valuations hard, especially overvalued companies would witness most of the heat. Moreover, momentum indicator is also indicating for a potential price consolidation in the stock. On the valuation front, the stock is available at forward price to cash flow multiple of 11.2x, which is higher than the industry median of 7.8x. Therefore, based on the above facts and valuation, we recommend a “Sell” rating on the stock at the closing price of CAD 139.66 as on July 30, 2021.

Technical Price Chart. Source: REFINITIV, Analysis by Kalkine

Park Lawn Corporation

Park Lawn Corporation (TSX: PLC) provides goods and services associated with the disposition and memorialization of human remains. The Company's products and services are sold on a pre-planned basis (pre-need) or at the time of a death (at-need).

Why Investors Should Book Profit?

• Potential Price Consolidation: Stock recorded splendid rally over the past one year, and sitting near 52W high, however, leading momentum indicator 14-day RSI is hovering in an overbought zone at 73, which indicates a potential price consolidation could take place in near term.

Technical Price Chart, Source: REFINITIV, Analysis by Kalkine group

• Resurgence in COVID-19 Cases: COVID-19 new Delta variant cases are spreading fast, China the second largest economy ok also witnessing the sharp resurgence in COVID-19. A new wave could hurt the equity valuation across the broad regardless the strong fundamentals of any particular company. And investors are making decent risk adjusted return on PLC, therefore taking off profit at the peak would be a wise decision from portfolio construction standpoint.

• Weak Debt Protection Metrices: At the end of the March quarter of 2021, PLC debt/equity ratio stood at 0.46x whereas industry median is 0.44x. Apart from this, the company’s debt protection metrices is also poor than the industry median, with Net Debt to EBITDA ratio stood at 9.6x whereas industry median of 4.34x. This is also way higher than the ideal Net Debt/EBITDA ratio of less than 5x.

Stock Recommendation: The stock is trading at a significantly stretched valuation against its peers, from the NTM P/E multiple standpoints. Its shares are trading at a P/E multiple of 39.86x whereas industry average NTM P/E multiple stood at 21.72x, which implies a valuation stretch of ~84%. Further, given the leading momentum indicator hovering in steep overbought zone, the stock is up for price consolidation. Therefore, we recommend a “Sell” rating on the stock at the closing price of CAD 36.07 on July 30, 2021.

1-Year Price Chart (as on July 30, 2021). Source: REFINITIV, Analysis by Kalkine Group

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.