UPS: From Delivering Packages to Delivering Value

3 hari lalu

As you probably know by now, my strategy consists of finding cheap, deep-value, beaten-up, underdog stocks. This is the strategy I've been using for the last 5 years and that allows me to consistently outperform the S&P 500 by 2x to 3x every year.
This does not guarantee that all my analyses are correct. But if I'm correct 6 or 7 times out of 10, then I'm a rich man!

Now back to UPS!
Over the last 3 years, the stock lost 64% of its value. But... did sales or income decline by the same account? Did margins decline? Did the company decrease its fleet by 60%?
The answer to all these questions is NO, and this is why I think the stock is undervalued.
Yeah, the tariff war and Amazon's slowing of the UPS agreement hurt sales, but these are transient.

Overview

• UPS stock is down 64% since its ATH in 2022.
  
• P/S ratio is at 0.8, the lowest since 2009.
  
• P/E ratio is at 12.6, the lowest in the history of the stock
  
• The P/B ratio is at 4.58, the lowest since 2006.
  
• Dividend yield is at 7.8%.
  
• The CEO recently bought $1 million worth of UPS stock.
  
• This data gives us some clues. The stock is obviously underpriced, despite the fact that UPS is still one of the market leaders and the sales are stable.
  

Financial performance

• Revenue: TTM $90.69 billion (+1.3% YoY); Revenue is improving, but still 10% down since the $100 billion in 2022.
  
• Profitability: Operating margin 9.4% (TTM), net margin 6.4%;
  
• EPS is now at $7.70, which is a similar level to what it was in 2020 and 2021, when the stock price was at $120. However, now the stock price is at $85.
  
• Balance Sheet: Debt $26 billion, debt-to-equity 1.45x, which is totally fine.
  

Growth prospects

• UPS is cutting costs and jobs, targeting $3.5 billion in savings by 2026 via automation/AI (5-7% annual cost reduction).
  
• E-commerce will sustain long-term growth.
  
• The company is innovating with AI-improved routes, self-driving trucks, and drones.
  

Technical Analysis

• The stock price is right above the $85 resistance level, which has been a support/resistance level since 2005.
  

My target

• Considering the prospects, estimates, etc, I can see UPS going to $110 to $130 range in mid-2026, providing an upside of 30% to 40%. This level also aligns with the Fibonacci 0.236 level.
  
• If the stock continues to drop, I will simply average down. I don't think it can drop much more from here, and it will definitely not go bankrupt.
  
• I'm gonna invest approximately 1% of my wealth into this stock.
  

Remember, I'm just sharing my journey and this is not financial advice! 😎

3 hari lalu

Dagangan aktif

I have placed a buy order allocating around 1% of my portfolio.