Expeditors currently trades at $116.76 per share and has shown little upside over the past six months, posting a middling return of 1.2%.

Is now the time to buy Expeditors, or should you be careful about including it in your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.

Why Do We Think Expeditors Will Underperform?

We're sitting this one out for now. Here are three reasons why EXPD doesn't excite us and a stock we'd rather own.

1. Long-Term Revenue Growth Disappoints

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Unfortunately, Expeditors’s 6.5% annualized revenue growth over the last five years was mediocre. This fell short of our benchmark for the industrials sector.

2. EPS Took a Dip Over the Last Two Years

Although long-term earnings trends give us the big picture, we like to analyze EPS over a shorter period to see if we are missing a change in the business.

Sadly for Expeditors, its EPS and revenue declined by 11.3% and 14.1% annually over the last two years. We tend to steer our readers away from companies with falling revenue and EPS, where diminishing earnings could imply changing secular trends and preferences. If the tide turns unexpectedly, Expeditors’s low margin of safety could leave its stock price susceptible to large downswings.

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).

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Expeditors’s ROIC has decreased significantly over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Final Judgment

Expeditors falls short of our quality standards. That said, the stock currently trades at 21.5× forward P/E (or $116.76 per share). This multiple tells us a lot of good news is priced in - we think other companies feature superior fundamentals at the moment. Let us point you toward an all-weather company that owns household favorite Taco Bell.

Stocks We Would Buy Instead of Expeditors

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