TravelCenters of America (NASDAQ:TA) has truly had a banner year. The company’s strong fundamentals have been the backbone of its success, and we believe its share price still has plenty of upside ahead. The organization has massive potential for expansion ahead that savvy investors won’t want to miss out on. With experts predicting further growth and strength in TA’s numbers, now might be a great time to consider adding the stock to your portfolio. Hence, we are bullish on TA stock.
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TravelCenters of America continues to grow and thrive, with more than 19,000 staff in over 280 locations across the U.S. and Canada. TA offers the essentials like fuel, food, and drinks, along with some of the cleanest shower stalls. Moreover, it offers some of the most popular fast food chains like IHOP, Burger King, and Taco Bell as part of its restaurant options. Hence, it’s easy to see why TA is such a hit on the road.
TA stock has fared much better than the broader market despite generating a negative return over the past year. However, in the past six months, the stock has generated a healthy 27% return, far ahead of its peers and the broader market. It still has a ways to go before it gets close to its 52-week high price of $65.33, though.
Most analysts feel that the stock is significantly undervalued, trading at a hefty discount to forecasts. Moreover, the stock trades at just 0.06 times forward sales estimates, 93% lower than the sector median. Therefore, there’s plenty to like about TA stock at current prices.
Robust Operating Performance
TravelCenters of America has seen tremendous growth this year. For the first three quarters, revenues improved by a remarkable 54.4% to $8.19 billion. In the third quarter, sales came in at an impressive $2.81 billion, 44.9% higher than last year. This impressive growth was driven by a 57.4% surge in fuel sales and a 10.5% increase in non-fuel sales. Furthermore, the company posted net income of nearly $37 million, eclipsing its 2021 result of $22.2 million, while EBITDA increased from $65.2 million to $88.6 million.
The future is bright for TA as its management continues to grow the enterprise. Through acquisitions, franchising, and construction, it has managed to increase its presence in the travel industry. A couple of months ago, it announced the opening of four new travel centers and planned to open four more locations by the end of this year. Additionally, it has completed enhancements at more than 50 travel centers as part of its site improvement efforts.
One of the most impressive aspects of TA’s business is its resiliency. Moreover, its business is unique because it can benefit from the same conditions that may be headwinds in other segments of its business. For example, the adverse economic conditions at this time have resulted in a slowdown in spending at its convenience stores. Moreover, its consumer motorists segment has also been impacted by inflationary pressures. However, the same market conditions have resulted in a robust fuel market that allows the firm to deliver higher margins.
Is TA Stock a Buy, According to Analysts?
Turning to Wall Street, TA stock maintains a Moderate Buy consensus rating. Out of two total analyst ratings, one Buy, one Hold, and zero Sell ratings were assigned over the past three months.
The average TA price target is $65, implying 48.5% upside potential.
The Takeaway
The fundamental health of TA is solid, setting it up to further capitalize on its growth initiatives and expand its network in the future. This strong foundation is supported by management’s commitment to reinvesting in the firm, which is set to pay off in 2023 and beyond. The firm’s earnings per share have grown by over double-digit percentages in the past three quarters.
The company promised that it will refresh its sites, advance its technology, and increase the reach of its network. Moreover, U.S. travel data indicates substantial improvement from pre-pandemic levels despite the current headwinds. Though travel spending has moderated a bit in recent months, it remains robust and points to an amazing outlook ahead.
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