Expeditors (EXPD)

Total return at 5 years: -1.5%/year = -2.5% appreciation + 1.0% dividend. The target price ($170) is ex-dividend; the $9 in dividends collected over 5 years are added separately.

By both methods, the value today (DCF $186 · Multiples $145) is below the market price ($193).

Today — expensive, no margin of safety: at $193 trades ~33.7% above its value discounted to today (~$145); the expected return does not even reach the risk-free rate (4.5%).

At 5 years — Sobrevalorado: the expected total return is negative — the price already discounts a demanding scenario that, if not met, results in a loss.

The bridge: the return at 5 years falls below the risk-free rate (4.5%) — which is why there is not even a discount to today's value. To require a 15% annual return, it would need to be bought at ~$91.

Educational / informational. Does not constitute investment advice.

The inverse approach: instead of projecting growth to obtain the value, the market price ($193) is taken as given and it solves for what annual owner-earnings growth would need to hold for 5 years for the present value —at the method's rate (4.5%, no-growth terminal)— to equal that price. It is the disconfirmation test: the expectations the price already pays for, contrasted against the method's projection.

The implied growth (6.9%/year) is in line with our base case (6.0%/year) → the price is consistent with the projection.

That growth implies ~$1.1 bn of owner earnings in year 5 (vs ~$1.1 bn of our base case). It recalculates if the DCF assumptions are edited.

Year-by-year projection of the selected scenario. From each year, two versions of the flow are derived: growth FCF (operating flow − total capex, the cash surplus) and maintenance FCF (the owner earnings: what the business yields if it only sustains its capacity). The flow is returned almost in full (dividend + buyback) or redeployed into the operation, so that EV stays roughly flat and multiples compress because the metric grows, not because of cash accumulation. The valuation is done on Resultado operativo (EV/EBIT). In edit mode, revenue, margins, capex, and exit multiples can be adjusted.

Expeditors is an asset-light logistics broker: it buys air, ocean and ground freight capacity in bulk and resells it, capturing the rate spread plus fees for customs brokerage and ancillary services. Year 0 is the TTM ended 30 June 2026 (rolling grid TTM+1a…+5a). The 4 August 2026 release (8-K, Item 2.02) carries no numerical guidance for revenue or earnings per share for 2026: the board offers only qualitative colour (elevated air freight rates from reduced passenger capacity during the Middle East conflict, sustained demand from AI hyperscalers, and tariff complexity driving customs brokerage). The absence of guidance is stated and the path is anchored to the real trajectory: consolidated revenue fell 45.5% in 2023 on a change in revenue recognition method (not operational, not comparable), so the relevant trajectory starts in 2024 (+14.0%), continues in 2025 (+4.4%) and closes in the TTM (+6.8%). The second quarter of 2026 showed a 32% year-over-year jump in revenue, driven largely by abnormally high air freight rates from the restriction of passenger flight capacity arising from the Middle East conflict — a temporary geopolitical tailwind, not a sustainable growth rate. Year 1 is anchored close to the TTM (7.5%) rather than extrapolating the quarterly peak, and decays smoothly towards a terminal rate of ~4.7%, in line with medium-term global trade growth for a mature freight broker. The operating margin improves modestly through operating leverage and the restructuring of the global technology function announced in the second quarter of 2026 (a US$25 million charge, with estimated annual savings of ~US$50 million, close to 10% of corporate expense). Capital expenditure is structurally low (0.4% of revenue, below depreciation and amortisation), so it is treated as entirely maintenance — there is no material growth capital expenditure to fund. The company returns more than 100% of free cash flow to shareholders (buybacks plus dividends above TTM free cash flow), funded in part from the cash balance; an explicit buyback is modelled (sharesPath) reducing the share count 1.8% a year, the same path in all three scenarios (§6), moderating the revealed pace of 3.8% because it is not sustainable indefinitely at a share price well above the recent average repurchase price (US$118 in 2025 against ~US$177 today). The base-case exit multiple (11.5× on operating income) is derived from the freight intermediation band (10-14×) at a lower-middle position: terminal growth is modest (~4.7%), the return on capital is exceptional (well above the 10% hurdle, given the model's almost capital-free balance sheet) but the business is intrinsically cyclical — tied to global trade volumes and volatile freight rates — which penalises the position within the band. The implied entry multiple today is well above the exit range, reflecting that the market is paying today for an earnings level inflated by the temporary disruption to air capacity; compressing towards the archetype band is the conservative and unbiased reading, not a punitive one.

Today's elevated multiple is the price of growth: if the business grows, the entry point cheapens on its own going forward (the metric grows while EV stays roughly flat). The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—, so the value curve shows whether value creation is concentrated in the early or the later years. The required return is applied to the base scenario.

They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.

The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).

Each card fixes a required annual return and answers: if the business is worth $170 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $193, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.

With a target price of $170 in 5 years plus $9 of dividends collected (the dividend adds to the return, not to the price) and a required return of 4.5% annually, the maximum to pay today is $145. Against the current market price ($193), the margin of safety is -33.7% (trades above the maximum → a premium is paid) and the total return at that price would be -1.5% annually.

• Elevated entry multiple. 21× operating income over the last twelve months, well above the archetype's 10-14× exit band.
• Potentially inflated TTM earnings. The second quarter of 2026 benefited from abnormally high air-freight rates.
• Expected 5-year return. -2% in the base case, after compressing the multiple toward the archetype's band.

Each margin over sales, year by year: historical (solid line) → projection (dotted).

• ✓ ROIC exceeds the cost of capital (~10%)
• ✓ CFROIC backs up the ROIC (94%, cash vs. accruals)
• ✓ Healthy balance sheet (low corporate debt)
• ✓ Durable competitive moat (multiple advantages)

• Return on invested capital. Well above the 10% bar, reflecting a balance sheet with almost no capital employed.
• Predictable cash generation. Operating cash flow closely tracks net income, with no material accounting distortions.
• Incremental return on capital. Omitted: invested capital declines due to the magnitude of the buybacks, which would prevent a reliable reading of the ratio.

Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.

The three drivers are volume × rate, specific to a freight broker: tonnage and average buy/sell rate for airfreight, container volume and consolidation rate for ocean freight, and customs declaration complexity for the brokerage segment. The divergence between segments in 2025 — air and customs growing, ocean declining — is why consolidated growth should not be read as a monolithic business.

The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (30-jun-2026): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).

• Elevated recent growth. TTM +6.8%, but with the second quarter of 2026 driven by a temporary geopolitical disruption.
• Divergence across segments. Airfreight and customs brokerage grow strongly, ocean freight declines from rate compression.
• Organic growth without acquisitions. The expansion track record does not depend on M&A, unlike much of the industry.

• Capital-light model with no owned assets. Buys and resells transportation capacity without owning aircraft, ships or trucks.
• Geographic concentration in China/Hong Kong. 19% of 2025 revenue and 15% of operating income, the central focus of tariff risk.
• Customer diversification. No single customer exceeds 5% of revenue.
• Structural cyclicality. The business is tied to global trade volume and volatile transportation rates.

• ✓Leverage (net debt / EBITDA)Net cash $1 bn
• –Interest coverage (EBIT / interest)no data
• –Liquidity (current ratio)no data
• ✓Cash quality (CFROIC vs ROIC)CFROIC backs 94% of ROIC
• ✓Value creation (ROIC − 10% bar)+71pp
• ✓Malinvestment test (capex vs incremental ROIC)Capex/D&A 0.9x — no over-investment
• !Float / working capitalConsumes cash $0.1 bn (positive WC)
• ✓Dilution (SBC % of revenue + shares)SBC 0.6% of revenue

A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.

• No financial debt. Debt-free balance sheet at the close of the second quarter of 2026.
• Cash position declining. Cash fell ~US$283 million over the half-year from the magnitude of the buybacks and dividend paid.
• Simple capital structure. No preferred stock or convertible instruments complicating the bridge to equity.

Who owns the shares — the alignment and whether there is a controlling shareholder.

• CEO tenure. 38 years of internal career before assuming the role in April 2026.
• Operational incentives culture. Compensation tied to each operating unit's accountability for its results since the IPO.
• Capital allocation concentrated in buybacks. More than three-quarters of capital returned, above the free cash flow of the period.

• No analyst coverage focused on a single event: the stock rose sharply after the second-quarter 2026 results, and part of the market may be extrapolating that earnings level forward
• The TTM result includes a quarter with abnormally high air-freight rates from the geopolitical disruption in the Middle East, which can be read as a structural improvement rather than a cyclical peak
• The global technology restructuring (US$25 million charge) creates short-term accounting noise that can obscure the underlying margin improvement

No margin of safety: the price already discounts a demanding scenario. Unlike the typical 'cheap opportunity' pattern, here the price appears to pay above what the normalized business can sustain: no clear source of a market discount is identified, which is itself a signal for caution.

The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.

Even in the bear scenario, the return holds at -10%/year (-40% total): the margin of safety protects the downside. The bull (+4%/year, +22% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• Reversal of air rates. Current margin depends on a temporary capacity disruption in the Middle East.
• Tariff war. Concentration of revenue and operating income in exports out of China/Hong Kong.
• Dependence on third-party carriers. With no owned assets, airline and ocean-carrier capacity and pricing directly impact profitability.
• Technology and cybersecurity risk. The business depends entirely on a complex proprietary platform, with a cyberattack precedent in 2022.

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  A narrow moat and ROIC 81% above the 10% bar, but the price sits above value (no margin) → great business, expensive.

• Peter Lynch Growth at a reasonable price (GARP)

  A stalwart growing 6% at a multiple/growth of 3.4 → expensive for its growth.

• Joel Greenblatt Cheap and high-return (Magic Formula)

  Earnings yield 5% (EBIT/EV) + ROIC 81% → falls outside the Magic Formula.

• Howard Marks Perception vs reality + cycle

  The price discounts 7%, in line with our 6%: perception and reality aligned.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor -11%/yr over 5y (material loss) → risk of permanent capital loss.

• Pat Dorsey Moat strength (Five Rules)

  A narrow moat, stable; sources: intangibles, efficient scale, cost advantage → partially passes the Five Rules.

• Aswath Damodaran Expectations implied by the price

  Justifying the price requires discounting 7%, within what we project (6%) — the story squares with the numbers.