Should I Do It? Kicking Tires at YRC Worldwide

Results at trucking firm YRC Worldwide (YRCW Quote) are driven by growth in the broad economy. The company is the nation's largest less-than-truckload (LTL) transporter, with a network of some 17,500 tractors and more than 64,000 trailers. Working with other LTL firms, YRC combines smaller customer orders onto one trailer to help cut shipping costs.

Despite the fact that the major stock market averages remain around their all-time highs, YRC shares trade at just 9.2 times expected 2007 earnings of $4.47 a share, based on Tuesday's closing price of $41.19. This is a discount to the company's historical average price/earnings (P/E) ratio, and also lower than the average 12.9 multiple given to competitors Con-Way (CNW Quote), Arkansas Best (ABFS Quote) and Old Dominion (ODFL Quote).

The consensus analyst estimate calls for the company's 2007 earnings to decline 10.7% to $4.47 a share, marking the second straight annual drop. I believe there could be further downside risk to near-term earnings, with no demand recovery in sight and the pressure of rising fuel costs.

With that in mind, I'm here to answer investors' question: Should I do it? Should readers back up the truck to buy YRC Worldwide, or drive on by and leave the stock in the dust?

Despite its discounted valuation, YRC shares have gained 9.2% year-to-date, and the company was mentioned positively in a Barron's article at the beginning of the year. However, I believe that YRC bulls may be stepping into a value trap.

Click here to view a video with David Peltier on this subject.