The market has favored the transportation and warehousing industry, vastly assigning resources to companies operating within it.

Three names stand out within the market's favorite industry: Old Dominion Freight Line (NASDAQ: ODFL), Saia (NASDAQ: SAIA) and RXO (NYSE: RXO) are at the top of the "popular" list based on market sentiment and other metrics.

Old Dominion is the clear pick within this small group of sector favorites. Those looking to squeeze the next move in this stock can break down sensible reasons, justifications and convictions behind the bullishness in this stock.

Gaining Perspective

Considering that Saia has been the only stock in the sector to outperform Old Dominion by as much as 29.83% during the past 12 months, investors need to find a good reason to differentiate the two, primarily through the lens of finding an adequate investment with potential upside. Analyst ratings point to a significant downside in Old Dominion and Saia, suggesting a 10.3% and a 12.3% consensus downside, respectively. 

When looking at price action, there is a direct connection between what analysts see and what market prices reflect. The two stocks are related by an over 80% correlation in prices. This relationship is reiterated by the lockstep price movement between the two.

Both stocks trade near all-time high prices, with the most recent weekly performance bringing them together to a solid historical resistance level. Old Dominion struggles to break past the $375 per share wall; that is at least the current state of affairs, which may soon change as investors digest the newest votes cast by broader markets. The difference maker between these two peers is all the more critical, considering that chart patterns and price action aren't a clear comparison. Look to the forward price-to-earnings ratio, which differs from the conventional P/E in that the next 12 months expected earnings are considered rather than the past 12 months. 

Saia stock trades at a forward P/E ratio of 25.7x, which will become inferior to Old Dominion's 30.4x. 

Analyst earnings expectations for Saia point to a $13.92 2024 earnings per share, equating to a 13.95% year-over-year growth rate. Conversely, Old Dominion's expectations lie at $12.38 EPS for 2024, assimilating a superior 16.32% annual growth rate. This may be the reason behind the markets rewarding a higher valuation multiple to Old Dominion over Saia, a dynamic which investors should welcome rather than initially react as thinking of Old Dominion as more "expensive."

Closing the Loop

The key to closing the gap lies in the top-line revenue figures. Another conventional valuation metric investors can look at as a comparison lies in the price-to-sales ratio, which may provide another angle upon which to value the underlying operations of each business. Saia stock sells for a 3.3x multiple, significantly lower than Old Dominion's 6.6x. Old Dominion's segment provides consulting services for supply chain solutions. Considering the challenging supply chain environments and disruptions experienced throughout 2020 to 2023, this consulting segment keeps paying dividends.

Within Old Dominion's investor presentation, management lays out the business's capital allocation strategies, indicating that most allocations go into share repurchases. Five thousand shares were repurchased during the twelve months leading to the first quarter 2023 earnings results, a reaffirming action by insiders suggesting that the stock may have additional upside potential.