BUSINESS
The Shyft Group, Inc. manufactures and assembles specialty vehicles for the commercial vehicle and recreational vehicle industries in the United States and internationally. It operates in two segments, Fleet Vehicles and Services, and Specialty Vehicles. The Fleet Vehicles and Services segment manufactures and sells commercial vehicles used in the e-commerce/last mile/parcel delivery, beverage and grocery delivery, laundry and linen, mobile retail, and trades and construction industries. This segment markets its commercial vehicles, including walk-in vans, cutaway vans, and truck bodies under the Aeromaster, Velocity, Trademaster, and Utilivan brands; and vocation-specific equipment upfit services under the Utilimaster Upfit Services and Strobes-R-Us brands.
INVESTMENT RATING
SHYF’s future returns on capital are forecasted to exceed the cost of capital. Accordingly, the company is expected to continue to be a modest Value Builder.
Shyft Group has a current Value Trend Rating of F (Lowest Rating).
This rating combines inconsistent signals from two proprietary PTR measures of a stock’s attractiveness. Shyft Group has a neutral Appreciation Score of 48 but a very low Power Rating of 2, with the Lowest Value Trend Rating the result.
Shyft Group’s stock is selling above targeted value. The current stock price of $12.20 compares to targeted value 12 months forward of $11.
This neutral appreciation potential results in an appreciation score of 48 (52% of the universe has greater appreciation potential.)
Shyft Group has a Power Rating of 2. (This very low Power Rating indicates that SHYF only has a better chance of achieving attractive investment performance over the near to intermediate term than 2% of companies in the universe.)
Factors contributing to this very low Power Rating include: SHYF’s earnings estimates have fallen very significantly in recent months; recent price action has been extremely unfavorable; and the Motor Vehicles & Car Bodies comparison group is in a slightly weakened position currently.
INVESTMENT PROFILE
SHYF’s financial strength is average. Financial strength rating is 60.
Relative to the S&P 500 Composite, The Shyft Group Inc has both Growth and Value characteristics; its appeal is likely to be to Income-oriented investors; the perception is that SHYF is normal risk. Relative weaknesses include: low forecasted profitability, and high stock price volatility. SHYF’s valuation is moderate: moderate dividend yield, high P/E ratio, and low price/book ratio. SHYF has unusually low market capitalization.
CURRENT SIGNALS
Shyft Group’s current operations are eroding. Return on equity is falling, reflecting: falling asset utilization; declining pretax margin; and falling leverage.
Shyft Group’s current technical position is very weak. The stock price is in a 8.9 month down move. The stock has declined 37.6% from its prior high. The stock price is below its 200 day moving average which is in a downtrend.
ALERTS
Slight negative changes in fundamentals have recently occurred for The Shyft Group Inc (NASDAQ: SHYF): significant quarterly sales deceleration occurred.
The stock is currently rated F.
The Shyft Group Inc (NASDAQ: SHYF) stock declined modestly by -1.8% on 4/1/24. The stock closed at $12.20. However, trading volume in this decline was below average at 71% of normal. The stock has been extremely weak relative to the market over the last nine months but has risen 1.6% during the last week.
CASH FLOW
In 2023, Shyft Group experienced a significant decline in cash of -$1.59 million (-14%). Sources of cash were lower than uses. Cash generated from 2023 EBITDA totaled +$26.33 million. Non-operating uses consumed -$2.13 million (-8% of EBITDA). Cash taxes contributed +$5.77 million (+22% of EBITDA). Re-investment in the business amounted to -$3.34 million (-13% of EBITDA). On a net basis, debt investors received -$5.30 million (-20% of EBITDA) while equity investors removed -$22.92 million (-87% of EBITDA).
Shyft Group’s Non-operating Income, %EBITDA has enjoyed a volatile overall uptrend over the period. This improvement was accompanied by stability for the Shyft Group Peer Group. In most years, Shyft Group was in the third quartile and second quartile. Currently, Shyft Group is at the lower quartile at -8% of EBITDA (-$2.13 million).
Shyft Group’s Cash Taxes, %EBITDA enjoyed a volatile overall uptrend over the period. This improvement was accompanied by a similar trend for the Shyft Group Peer Group. (Since 2018 Cash Taxes, %EBITDA has decelerated very sharply.) In most years, Shyft Group was in the top quartile and third quartile. Currently, Shyft Group is upper quartile at +22% of EBITDA (+$5.77 million).
Shyft Group’s Business Re-investment, %EBITDA has suffered a volatile overall downtrend over the period. This downtrend was accompanied by a similar trend for the Shyft Group Peer Group. In most years, Shyft Group was in the top quartile and second quartile. Currently, Shyft Group is upper quartile at -13% of EBITDA (-$3.34 million).
Shyft Group’s Debt Investors, %EBITDA has experienced a volatile overall uptrend over the period. This improvement was accompanied by stability for the Shyft Group Peer Group. In most years, Shyft Group was in the top quartile and third quartile. Currently, Shyft Group is below median at -20% of EBITDA (-$5.30 million).
Shyft Group’s Equity Investors, %EBITDA has enjoyed a volatile overall uptrend over the period. This improvement was accompanied by a similar trend for the Shyft Group Peer Group. In most years, Shyft Group was in the lower quartile and second quartile. Currently, Shyft Group is lower quartile at -87% of EBITDA (-$22.92 million).
Shyft Group’s Change in Cash, %EBITDA has experienced a volatile overall downtrend over the period. This downtrend was accompanied by an opposite trend for the Shyft Group Peer Group. (Since 2021 Change in Cash, %EBITDA has accelerated very sharply.) In most years, Shyft Group was in the lower quartile and top quartile. Currently, Shyft Group is lower quartile at -6% of EBITDA (-$1.59 million).
Shyft Group’s Cash, %Revenue has experienced a small downtrend over the period. This downtrend was accompanied by stability for the Shyft Group Peer Group. In most years, Shyft Group was in the third quartile and second quartile. Currently, Shyft Group is lower quartile at +1%.
PROFITABILITY
Shyft Group’s return on equity has improved very significantly since 2014. The current level of 2.6% is 3.71X the low for the period and is -54.0% from the high.
Shyft Group’s very strong negative trend in pretax operating return significantly offset by a very strong positive trend in non-operating factors is a significant analytical factor.
The productivity of Shyft Group’s assets declined over the full period 2014-2023: asset turnover has suffered a strong overall downtrend.
Shyft Group’s pretax margin enjoyed a very strong overall uptrend over the period 2014-2023.
Non-operating factors (income taxes and financial leverage) had a very significant positive influence on return on equity.
Shyft Group’s return on equity is lower quartile (2.6%) for the four quarters ended December, 2023.
Operating performance (pretax return on assets) is lower quartile (0.1%) reflecting asset turnover that is slightly below median (1.65X) and unavailable pretax margin .
Tax “keep” rate (income tax management) is upper quartile (933.3%) resulting in after tax return on assets that is lower quartile.
Financial leverage (leverage) is at median (2.10X).
GROWTH RATES
There are no significant differences between Shyft Group’s longer term growth and growth in recent years.
Shyft Group’s historical income statement growth and balance sheet growth have diverged. Revenue growth has paralleled asset growth; earnings growth has exceeded equity growth.
Annual revenue growth has been 6.0% per year.
Total asset growth has been 10.0% per year.
Annual E.P.S. growth has been 21.0% per year.
Equity growth has been 6.1% per year.
Shyft Group’s consensus growth rate forecast (average of Wall Street analysts) is 25.0% — substantially above the average of the historical growth measures.
Relative to the Shyft Group Peer Group, Shyft Group’s historical growth measures are erratic. E.P.S. growth (21.0%) has been upper quartile. Total asset growth (10.0%) has been at median. Revenue growth (6.0%) has been slightly below median. Equity growth (6.1%) has been below median.
Consensus growth forecast (25.0%) is at the upper quartile.
PRICE HISTORY
Over the full time period, Shyft Group’s stock price performance has been variable and below market. Between June, 2013 and April, 2024, Shyft Group’s stock price rose +99%; relative to the market, this was a -39% loss. Significant price moves during the period: 1) January, 2023 – October, 2023: -67%; 2) December, 2021 – June, 2022: -62%; 3) March, 2020 – December, 2021: +281%; 4) October, 2018 – December, 2019: +169%; 5) April, 2018 – October, 2018: -62%; and 6) February, 2017 – October, 2017: +143%.
TOTAL INVESTMENT RETURNS
Current annual total return performance of -59.7% is lower quartile relative to the S&P 500 Composite.
In addition to being lower quartile relative to S&P 500 Composite, current annual total return performance through February, 2024 of -59.7% is lower quartile relative to The Shyft Group Inc Peer Group.
Current 5-year total return performance of 3.3% is substantially below median relative to the S&P 500 Composite.
Through February, 2024, with substantially below median current 5-year total return of 3.3% relative to S&P 500 Composite, Shyft Group’s total return performance is substantially below median relative to The Shyft Group Inc Peer Group.
VALUATION BENCHMARKS
Relative to S&P 500 Composite, SHYF’s overall valuation is normal. The highest factor, the ratio of enterprise value/earnings before interest and taxes, is upper quartile. Price/earnings ratio is upper quartile. Ratio of enterprise value/assets is near the lower quartile. Price/equity ratio is lower quartile. The lowest factor, the ratio of enterprise value/revenue, is lower quartile.
Relative to Shyft Group Peer Group, SHYF’s overall valuation is normal. The highest factor, the ratio of enterprise value/earnings before interest and taxes, is upper quartile. Price/earnings ratio is upper quartile. Ratio of enterprise value/assets is lower quartile. Ratio of enterprise value/revenue is at the lower quartile. The lowest factor, the price/equity ratio, is lower quartile.
Shyft Group has a major value gap compared to the median. For SHYF to hit median valuation, its current ratio of enterprise value/revenue would have to rise from the current level of 0.63X to 1.03X. If SHYF’s ratio of enterprise value/revenue were to rise to 1.03X, its stock price would be higher by $10 to $22.
For SHYF to achieve upper quartile valuation relative to the Shyft Group Peer Group, its current ratio of enterprise value/revenue would have to rise from the current level of 0.63X to 1.86X. If SHYF’s ratio of enterprise value/revenue were to rise to 1.86X, its stock price would increase by $31 from the current level of $12.
VALUE TARGETS
SHYF’s future returns on capital are forecasted to exceed the cost of capital. Accordingly, the company is expected to continue to be a modest Value Builder.
Shyft Group’s current Price Target of $15 represents a +25% change from the current price of $12.20.
This neutral appreciation potential results in an appreciation score of 48 (52% of the universe has greater appreciation potential.)
With this neutral Appreciation Score of 48, the low Power Rating of 2 results in an Value Trend Rating of F.
Shyft Group’s current Price Target is $15 (+6% from the 2023 Target of $14 and +25% from the 04/01/24 price of $12.20). This slight rise in the Target is the result of a +4% increase in the equity base and a +2% increase in the price/equity multiple. The forecasted decline in growth has a large negative impact on the price/equity multiple and the forecasted increase in cost of equity has a slight negative impact as well. More than offsetting these Drivers, the forecasted increase in return on equity has a very large positive impact.
PTR’s return on equity forecast is 10.7% — in line with our recent forecasts. Forecasted return on equity enjoyed a dramatic, erratic increase between 2015 and 2023. The current forecast is significantly below the 2021 peak of 25%.
PTR’s growth forecast is 7.0% — below our recent forecasts. Forecasted growth enjoyed a dramatic, steady increase between 2017 and 2023. The current forecast is well above the 2017 low of 1%.
PTR’s cost of equity forecast is 7.8% — in line with recent levels. Forecasted cost of equity suffered a dramatic, erratic increase between 2015 and 2023. The current forecast is well below the 2021 peak of 14.8%.
At Shyft Group’s current price of $12.20, investors are placing a positive value of $0 on its future investments. This view is consistent with the company’s most recent performance that reflected a growth rate of 13.0% per year, and a return on equity of 9.5% versus a cost of equity of 7.6%.
PTR’s 2025 Price Target of $15 is based on these forecasts and reflects an estimated value of existing assets of $15 and a value of future investments of $0.
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