C.H Robinson Worldwide Logistics Research

1. INDUSTRY
C.H. Robinson Worldwide is a third party logistics “provider of multimodal transportation services and logistics solutions.” (Chrobinson.com) C.H. Robinson Worldwide belongs to the industrial sector, airfreight and logistics sub-industry. Jim Corridore in the Standards and Poors Sub-Industry review states that there is “a positive fundamental outlook for the air freight and logistics industry for the next 12 months.” (Standardabpoors.com) Katie Lally suggests that 2014 “should still be a profitable year for transportation” despite the economy did not recover fully after the Recession. (kcsmartport.com) I would say that the forecasts for 2014 for the transportation and logistics sub-industry in the U.S. and globally differ. The American Recession affected the world’s economy. The transportation service as a product itself depends on the sales and merchandize production growth. Globally and domestically, economy recovers at a different speed. Transportation and logistics companies that have their presence worldwide have more chances to increase their revenues. As Corridore mentions in his Sub-Industry review, “the volume of activity coming out of Asia, and particularly China, should act as a natural support to air freight volumes over the next couple of years.” (Standardabpoors.com) The transportation and logistics companies will always be present on the market: any give product should be transported from the production line to the retail point. The biggest concern is the retail and manufacturing growth because the transportation and logistics sector heavily depends on it. In her article, Lally mentions that “Washington-based global agency projected growth of the world economy in 2014 to clock in at only 2.4 percent, dow...

... middle of paper ...

...96 – 0.0576)
E(Rs) = 5.149 or 5.15%
As a result, “k” equals to 5.15%.
Value of the company can be calculated using the PVGO: however, there is a problem with the formula because I found that in my case, g>k. To find the g rate, I was using the formula PEG ratio = (P/E)/g. Using the data from Yahoo Finance, I found P/E=15.93 and PEG ratio = 2.00. Therefore, g = (P/Ettm)/PEG ratio = 15.93 / 2 = 7.965%
One of the explanations for g>k is that the formula we are using for the calculations is too simplistic and does not includes more factors.
According to my calculations, the sustainable P/E ratio for the firm is negative 1.51.
P/E = (1-b)/(k-ROE*b) = - 1.5083. If it were a smaller but positive number, I could tell that company does not have any possibility to growth. A negative P/E means that for some reason, a company is losing money. (Investopedia.com)
Appendix 1