(By Balachander) Roadrunner Transportation Systems Inc. (NYSE: RRTS) shares were initiated with a "Buy" rating and price target of $30 by Deutsche Bank (DB).
The bank wrote it sees solid growth opportunities as the company continues to expand its diversified transportation service offerings.
Roadrunner can roughly double the size of the company over the next five years as the company continues to gain market share through both organic expansion as well as additional acquisitions, the bank said.
"While shares of Roadrunner are up 24% over the past six months (vs. an 8% increase in the S&P 500), we see further upside potential as earnings estimates feel conservative," DB said.
Moreover, DB believes Roadrunner deserves to garner a higher multiple due to: industry-leading top- and bottom-growth; an asset-light business model; strong free cash flow generation; and improving returns.
The bank said the stock should benefit from multiple expansions as it currently trades at a 20% discount to DB's nonasset index despite generating better top- and bottom-line growth.
Roadrunner has a history of supplementing organic growth with tuck-in acquisitions which should boost growth, DB said. Since its May 2010, IPO Roadrunner has acquired 13 companies, including 8 last year.
The stock, which has been trading in the 52-week range of $15.00 to $23.61, jumped 4.00% to trade at $23.12 on Wednesday.