Valuations for trucking companies

March 10, 2022

by a searcher in Dickinson, TX 77539, USA

Can someone tell me what the valuations are for trucking companies with owner operators, and company owned trucks? How are the trucks valued now that truck prices have increased, and fuel has skyrocketed?

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Reply by a searcher
from Harvard University in Fort Wayne, IN, USA

I spent some time here (IN has A LOT of trucking companies) and would encourage caution in the space. It is incredibly overvalued right now with strategics grabbing companies for higher multiples (8-10x) than what it was for years (4-6x, 8x if they have some scale and outstanding accounts). And based on some significant time with two carriers, I’d strongly recommend sticking with the asset light model. You can squeeze a few more points in good times (low cost of debt + high shipping rates), but the industry is so cyclical, that it’s nearly impossible to time things right if you haven’t been in the business for years (and even those guys frequently go to zero and have to start again). I thought about buying a local firm and converting the whole thing from asset heavy to asset light given the current market (people are buying trucks and trailers right now), but ultimately it’s incredibly difficult to know the value of what you’ve got unless your on the inside of the company or you’ve been in the industry for years. And I’ll end where I started, prices for these companies are at all time highs. If the cycle continues, there is 100% chance they will revert back before you’re ready for it. Good luck!

Reply by a searcher
from The University of Arizona in Denver, CO, USA

With owner operators and owned trucks, focus on Cash Flow. Trucks should be replaced every 4-5 years, bought new and cycled out, assuming long haul 80k+ miles per year, and will cost $150-175k to replace (assuming basic tractors). Do some quick math on the truck fleet to understand maintenance capital. Trailers every 20 years (assuming basic dry and reefer). Take the EBITDA - Maint CapX = Cash Flow number by 6-8x at most. The typical result is 4-5x on EBITDA, assuming they make decent margins and are of size or scale. This is for trucking companies in the $3-5m of cash flow range which are hauling commoditized goods and don't have any particularly special "trick". Less than than, take 0.5x-1.0x off the multiples. Happy to chat more on it.

The only transport businesses that would trade above that are anything of major size and scale ($20m+ of EBITDA = $10m+ of CF) with some kind of "trick" or completely asset light businesses (no company owned or O/Os or trailers). Everything else likely falls in between.

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