TFI International Inc. (TSE:TFII): A Case for Undervaluation and Intrinsic Value in a Competitive Sector

The transportation and logistics sector has long been a barometer for macroeconomic health, with companies like TFI International Inc. (TSE:TFII) navigating a complex landscape of demand fluctuations, operational costs, and capital structure challenges. As of December 2025, TFI International presents a compelling case for undervaluation, supported by a combination of valuation metrics, intrinsic value analysis, and sector positioning. This article dissects the company's financial fundamentals and market dynamics to argue that TFII may offer a compelling long-term investment opportunity.

Valuation Metrics: A Mixed but Promising Picture

TFI International's trailing twelve-month (TTM) price-to-earnings (P/E) ratio stands at , reflecting a 9.93% increase compared to 2024 levels. While this exceeds the company's 3-year historical average of 20.77 and the broader transportation industry's P/E of 25.6x, it remains significantly lower than the peer average of 33.6x. This discrepancy suggests that TFII is relatively undervalued compared to its direct competitors, despite being priced at a slight premium to the industry. Analysts estimate a fair P/E of 22.6x for TFII, implying the stock may be overvalued based on this metric. However, this assessment overlooks the company's robust revenue growth and operational resilience.

The enterprise value-to-EBITDA (EV/EBITDA) ratio further strengthens the undervaluation narrative. TFII's EV/EBITDA of 9.4x in 2025 is notably lower than the Ground Transportation industry median of 12.9x, indicating a discount relative to peers. This metric aligns with broader sector trends, where transportation sector EV/EBITDA multiples have declined from 10.3x in 2024 to 9.2x in 2025, reflecting cautious investor sentiment. Yet, TFII's valuation remains attractive within this context, particularly given its diversified business model spanning less-than-truckload (LTL), truckload (TL), and logistics services.

Intrinsic Value and Balance Sheet Dynamics

Discounted cash flow (DCF) analysis places TFII's intrinsic value at , implying a potential upside of 10.8% from its current market price. This estimate assumes moderate earnings growth and stable capital expenditures, both of which are reasonable given the company's historical performance. For instance, TFII has achieved 10.6% annual revenue growth over the past decade, outpacing the Transportation industry's 1.4% earnings growth rate. However, earnings have declined at an average annual rate of -4.5%, a trend that raises questions about margin compression and debt servicing costs.

The company's balance sheet reveals a high debt-to-equity ratio of 113.48%, underscoring its reliance on debt financing. While this level of leverage is not uncommon in capital-intensive sectors like transportation, it introduces financial risk, particularly in a rising interest rate environment. That said, TFII's price-to-book (P/B) ratio of 2.74x suggests the market values the company at a premium to its tangible assets, a sign of confidence in its intangible assets and operational efficiency.

Sector Positioning and Competitive Advantages

TFII's competitive positioning is bolstered by its diversified revenue streams and scale. The company's logistics segment, for example, has demonstrated a 50.3% gross margin, significantly higher than its 4.4% profit margin in core transportation services. This highlights the potential for margin expansion through strategic shifts toward higher-margin logistics offerings. Additionally, TFII's return on equity (ROE) of 12.4% outperforms many peers, reflecting efficient capital allocation despite its debt-heavy structure.

The transportation sector's valuation environment also favors value investors. With sector-wide EV/EBITDA multiples contracting in 2025, companies with strong operational fundamentals-like TFII-are likely to outperform in a recovery scenario. Furthermore, TFII's intrinsic value estimate of $135.02 suggests the market has not fully priced in its long-term growth potential, particularly in logistics and asset-light operations.

Risks and Considerations

Investors must weigh TFII's high debt load against its revenue growth and sector dynamics. A debt-to-equity ratio of 113.48% increases vulnerability to interest rate hikes and economic downturns, which could strain cash flow. Additionally, the company's earnings decline (-4.5% annually) indicates ongoing operational challenges, such as rising fuel costs or competitive pricing pressures.

Sector-wide headwinds, including regulatory changes and supply chain volatility, also pose risks. However, TFII's diversified business model and strong balance sheet liquidity mitigate some of these concerns. For instance, its logistics segment's high gross margins provide a buffer against transportation segment volatility.

Conclusion: A Compelling Long-Term Opportunity

TFI International Inc. (TSE:TFII) occupies a unique position in the transportation sector, combining undervaluation metrics with strong revenue growth and operational diversification. While its P/E ratio exceeds historical fair value estimates, the stock trades at a discount to peers and offers a compelling intrinsic value upside. The company's high debt-to-equity ratio introduces risk, but its EV/EBITDA of 9.4x and sector-wide valuation compression suggest the market has not fully priced in its long-term potential.

For investors with a medium-term horizon, TFII represents a high-conviction opportunity to capitalize on undervaluation while benefiting from the transportation sector's cyclical recovery. As the company continues to optimize its capital structure and expand into higher-margin logistics services, the gap between intrinsic value and market price may narrow significantly.