from Capitalist Times
In its fiscal third quarter ended March 31, 2015, Student Transportation (STB) grew its revenue by 13% and its cash flow by 20%. Operating margins also widened to 20.6% from 19.3% a year ago, thanks to lower fuel costs and efficiency gains.
In recent years, the company has sought to reduce fuel costs by converting much of its fleet from diesel to liquefied petroleum gas; the sharp drop in North American propane prices has been a boon for the firm’s margins.
Investors should also be pleased that the firm has opted to pay its monthly dividend in U.S. dollars instead of Canadian dollars, a move that aligns with its revenue mix.
Management’s guidance calls for the company to grow its cash flow by 5% to 7% annually. The stock’s recent underperformance reflects currency-related headwinds and concerns about rising interest rates. But Student Transportation’s underlying business continues to deliver.
The stock rates a buy up to U.S.$7 per share.
Roger Conrad, Capitalist Times, www.capitalisttimes.com, 888-960-2759, May 22, 2015
