There may be no sweeter word for investors than “undervalued.” This is what a smart investor always looks out for, and Paul Price thinks he’s found it.
FedEx "took a major tumble in September after reporting somewhat disappointing results for its end of August, fiscal Q1," Price wrote recently on Real Money. "Shares which had been almost $320 last May plunged briefly to south of $217."
In the days since, "FDX rebounded decently as cooler heads realized fiscal 2022, which ends May 31, 2022, is still on track to see record EPS of about $19.40 or better."
Price adds that "the company is extremely well positioned for the new economic environment. There will be more shipments of goods at now increased prices from both FDX and its main rival UPS (UPS). As those price increases kick in, EPS are sure to grow rapidly, reversing the temporary dip suffered last quarter.”
Price went on to note that “FedEx's past decade was quite impressive across all major metrics. Better still, while continuous holders more than tripled their money the shares actually lagged both EPS and dividend growth.”
In a strong environment for shippers, “simply reverting back to a more typical valuation could easily send the stock back to near $300 by June of 2022.”
Price adds "that goal is far from an upper limit. FedEx topped out above $305 during COVID-ravaged 2020 and almost $320 earlier in 2021."
In addition, "both Value Line and Yahoo Finance analysts see higher revenues and earnings next year and beyond. Were FDX to trade at 17.5-times earnings again as it did in 2018, 2020 and earlier this year it could reach about $339 by next summer."