Over the past six months, Old Dominion Freight Line has been a great trade, beating the S&P 500 by 28.3%. Its stock price has climbed to $218.78, representing a healthy 37.3% increase. This was partly due to its solid quarterly results, and the performance may have investors wondering how to approach the situation.

Is now the time to buy Old Dominion Freight Line, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free.

Why Is Old Dominion Freight Line Not Exciting?

Despite the momentum, we don’t have much confidence in Old Dominion Freight Line. Here are three reasons why there are better opportunities than ODFL, plus one stock we’d rather own.

1. Demand Slips as Sales Volumes Slide

Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful Ground Transportation company because there’s a ceiling to what customers will pay.

Old Dominion Freight Line’s units sold came in at 2.59 million in the latest quarter, and they averaged 7.9% year-on-year declines over the last two years. This performance was underwhelming and implies there may be increasing competition or market saturation. It also suggests Old Dominion Freight Line might have to lower prices or invest in product improvements to grow, factors that can hinder near-term profitability.

2. EPS Took a Dip Over the Last Two Years

While long-term earnings trends give us the big picture, we also track EPS over a shorter period because it can provide insight into an emerging theme or development for the business.

Sadly for Old Dominion Freight Line, its EPS declined by more than its revenue over the last two years, dropping 8.1%. This tells us the company struggled to adjust to shrinking demand.

3. New Investments Fail to Bear Fruit as ROIC Declines

ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Over the last few years, Old Dominion Freight Line’s ROIC has unfortunately decreased significantly. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Final Judgment

Old Dominion Freight Line isn’t a terrible business, but it doesn’t pass our quality test. With its shares outperforming the market lately, the stock trades at 38.8× forward P/E (or $218.78 per share). At this valuation, there’s a lot of good news priced in - we think there are better opportunities elsewhere. We’d suggest looking at the most dominant software business in the world.

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