Knight Transportation Inc. Stock Upgraded (KNX)

NEW YORK ( TheStreet) -- Knight Transportation (NYSE: KNX) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, growth in earnings per share, good cash flow from operations and increase in stock price during the past year. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • KNX's revenue growth has slightly outpaced the industry average of 12.3%. Since the same quarter one year prior, revenues rose by 17.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • KNX's debt-to-equity ratio is very low at 0.11 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, KNX has a quick ratio of 2.38, which demonstrates the ability of the company to cover short-term liquidity needs.
  • KNIGHT TRANSPORTATION INC has improved earnings per share by 8.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, KNIGHT TRANSPORTATION INC increased its bottom line by earning $0.75 versus $0.71 in the prior year. This year, the market expects an improvement in earnings ($0.90 versus $0.75).
  • Net operating cash flow has significantly increased by 442.91% to $30.26 million when compared to the same quarter last year. In addition, KNIGHT TRANSPORTATION INC has also vastly surpassed the industry average cash flow growth rate of 2.46%.
  • After a year of stock price fluctuations, the net result is that KNX's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.

Knight Transportation, Inc., together with its subsidiaries, operates as a short to medium-haul truckload carrier of general commodities in the United States. The company has a P/E ratio of 22.4, above the average transportation industry P/E ratio of 22.1 and above the S&P 500 P/E ratio of 17.7. Knight Transportation has a market cap of $1.34 billion and is part of the services sector and transportation industry. Shares are up 7.4% year to date as of the close of trading on Tuesday.

You can view the full Knight Transportation Ratings Report or get investment ideas from our investment research center.

-- Written by a member of TheStreet Ratings Staff

TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.
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