TravelCenters of America Inc. (TA) in Westlake, Ohio, operates, or franchises, travel centers, standalone truck service facilities, and a standalone restaurant. Its travel centers offer a range of products and services that include diesel fuel, gasoline, truck repair and maintenance services, quick-service restaurants, full-service restaurants, and others. Its travel centers operate under the brand names of TravelCenters of America, TA, TA Express, Petro Shopping Centers, and Petro.
On April 4, 2022, TA announced the completion of its acquisition of two travel center locations located along the Interstate 81 corridor in Virginia–Petro Raphine and TA Lexington–in time for the summer driving season. Both have been successful TA franchise locations since 2011 and, by owning these locations, TA expects to realize significantly higher cash flows.
Memorial Day typically kicks off the summer driving season. In the absence of pandemic-related restrictions, Americans look set to hit the road in large numbers this year despite skyrocketing gasoline prices. Growing consumer spending and pent-up demand suggest a busy summer driving season ahead. According to the Energy Information Administration, the average U.S. household will spend $2,945 on gasoline in 2022, 18% higher than in 2021. The report also forecasts that U.S. gasoline consumption from April through September 2022 will average 9.20 million b/d, up 75,000 b/d from 2021.
TA stock has gained 45.2% in price over the past year and 25.4% year-to-date to close the last trading session at $38.87.
Here is what could influence TA’s performance in the upcoming months:
Robust Financials
TA’s total revenues increased 58% year-over-year to $2.03 billion for the fourth quarter, ended Dec. 31, 2021. The company’s adjusted net income increased 813.7% year-over-year to $13.18 million. Also, its adjusted EPS came in at $0.89, representing a 423.5% increase year-over-year. In addition, its adjusted EBITDA increased 47.8% year-over-year to $52.89 million.
Favorable Analyst Estimates
TA’s EPS and revenue for the quarter ending March 31, 2022, increased 140.5% and 56.5%, respectively, year-over-year to $0.15 and $2.20 billion. It surpassed the Street’s EPS estimates in each of the trailing four quarters. In addition, its EPS is expected to grow at 5% per annum over the next five years.
Discounted Valuation
In terms of forward EV/Sales, TA’s 0.27x is 76.1% lower than the 1.15x industry average. Its 12.21x forward non-GAAP P/E is 1.4% lower than the 12.39x industry average. Also, the stock’s 0.07x forward P/S is significantly lower than the 0.93x industry average.
POWR Ratings Show Promise
TA has an overall A rating, which equates to a Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. TA has an A grade for Growth. This is justified given its revenue and earnings growth over the past year.
TA also has an A grade for Value, which is consistent with its 3.73x trailing-12-month P/CF, which is 64.9% lower than the 10.65x industry average.
In addition, the stock has a B grade for Sentiment, which is in line with its revenue and earnings growth estimates.
TA is ranked #2 among 47 stocks in the Specialty Retailers industry. Click here to access TA’s ratings for Momentum, Stability, and Quality.
Bottom Line
With the summer driving season expected to kick off strongly, TA is well-positioned to benefit. Given its discounted valuation, robust financials, and positive revenue and earnings growth estimate, we think it could be wise to buy this stock now.
How Does TravelCenters of America Inc. (TA) Stack Up Against its Peers?
TA has an overall POWR Rating of A, equating to a Strong Buy rating. Check out these other stocks within the Specialty Retailers industry with an A (Strong Buy) or B (Buy) rating: The ODP Corporation (ODP), Canadian Tire Corporation, Limited (CDNAF), and NEXT plc (NXGPY).
Click here to checkout our Retail Industry Report for 2022
TA shares were trading at $38.58 per share on Monday morning, down $0.29 (-0.75%). Year-to-date, TA has declined -25.26%, versus a -7.56% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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