Value, like so many fundamental investing principles, happens to be a relative concept. In a pandemic-driven world, valuations for companies operating in "Covid-friendly" sectors have outperformed. Many such companies are now granted calculations well in excess of pre-pandemic levels as investors seek growth prospects in a lower for longer interest rate environment.
Key player in the transportation of goods sold online, Cargojet (TSX:CJT) is an indirect option for exposure to the strong e-commerce secular trend, and is one of the best ways Canadian investors can gain exposure to this growth area for various reasons.
Perhaps the most crucial investing thesis for Cargojet is the air cargo company’s monopoly on overnight shipping in Canada. With a market share of over 90% in this space, Cargojet has essentially cornered the market, and has signed lucrative deals with key e-commerce players such as Amazon.com, Inc. (NASDAQ:AMZN), essentially cementing Cargojet’s hold on this market.
The threat of large players such as Amazon coming into Canada directly and competing with Cargojet in this business remains. However, as we’ve seen with the experience of other American retailers such as Target, the distribution and logistics business in Canada is both onerous and difficult to manage.
Cargojet’s monopoly in this space has therefore correctly been priced in. However, on a valuation to growth basis (PEG ratio), Cargojet looks less expensive than one may initially think. For investors hungry for growth, Cargojet is a business I’d recommend considering.
Invest wisely, my friends.
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