Cargojet's Five-Year Slump Tests Investor Patience Despite Recent Gains
Shares of Cargojet Inc. (TSE:CJT) surged 16% in the latest quarter, a welcome reprieve for investors. Yet, this short-term rally barely scratches the surface of a deeper, five-year downturn that has eroded more than half of the stock's value, leaving long-term holders with a 57% loss.
The disconnect between Cargojet's operational metrics and its share price performance is drawing analyst scrutiny. The company achieved profitability during this five-year span and has grown revenue by 8.2%. Typically, such milestones would bolster a stock. However, a modest 1.5% dividend yield and broader market headwinds have failed to catalyze sustained investor confidence.
"The market acts as a voting machine in the short run, but a weighing machine in the long run," noted one portfolio manager, echoing Benjamin Graham. The recent uptick may reflect short-term voting, but the long-term weigh-in has been harsh. The Total Shareholder Return (TSR), which includes dividends, stands at -54% over five years—slightly better than the share price return alone but still deeply negative.
Industry background points to a challenging period for freight and logistics, with post-pandemic normalization squeezing margins. Cargojet, a key player in overnight air cargo for Canada, faces intense competition and fluctuating fuel costs. While recent insider buying in the last quarter signals some internal confidence, it contrasts sharply with the stock's annualized loss of 9% per year over the half-decade.
"This isn't just an underperformance; it's a chronic erosion of capital," said Marcus Thorne, a veteran transport sector analyst at Veritas Capital. "A single quarter's pop doesn't reverse a five-year trend. Investors need to see consistent execution on margins and clear signs of market share gains before calling a bottom."
Other observers were more measured. Sarah Chen, a portfolio manager with Fraser & Associates, noted, "The fundamentals aren't all dire. Profitability is a crucial foundation. For contrarian investors, this level of pessimism, coupled with insider activity, could signal a potential inflection point, albeit a high-risk one."
The tone was sharper from retail investor David Rigby, who commented on an investor forum: "Five years of excuses while my investment got halved? Management needs to wake up. This recent bump feels like a dead cat bounce until they prove otherwise. The 'opportunity' here smells more like a value trap."
In contrast, Eleanor Shaw, a long-term income-focused shareholder, offered a different perspective: "The dividend, while small, has provided a slight cushion in the TSR. I'm not happy with the performance, but I'm watching the cost structure and new contract wins. The overnight network is still vital infrastructure."
As markets overall have climbed 29% in the past year, Cargojet's 16% decline (including dividends) highlights its specific struggles. The company faces the dual task of reassuring investors of its growth trajectory while navigating an uncertain economic landscape for cargo demand.
Market returns referenced reflect the market-weighted average of stocks trading on Canadian exchanges.
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This analysis is based on historical data and analyst forecasts using an unbiased methodology. It is not financial advice and does not constitute a recommendation to buy or sell any stock, nor does it consider individual objectives or financial situations. Our long-term focus is driven by fundamental data. Analysis may not include the latest price-sensitive announcements. The author and publisher have no position in any stocks mentioned.