Best Stocks #1 (Small Cap): Echo Global Logistics (ECHO)
Echo Global Logistics (ECHO) uses web-based proprietary technology to provide business process outsourcing to the transportation industry. Founded in 2005, ECHO serves more than 28,500 small- and midsize customers who use its technology to access the best shipping prices from a network of 24,000 carriers in a matter of seconds.
This innovation has helped grow revenues 71% compounded annually from $7.3 million in Echo’s first year of operation to $874 million in the trailing 12 months.
In its third-quarter report, Echo Global Logistics increased revenue 22% year-over-year to $235 million and non-GAAP operating income by 12.4% YOY to $7.1 million. CEO Doug Waggoner commented, “Echo posted another quarter of double digit growth in revenue and earnings … Despite a difficult pricing environment, the consistent execution of our strategy is delivering profitability increases to our bottom line.”
Let’s face it — it’s not a glamorous business. Since ECHO stock went public Oct. 1, 2009, at $14 per share, it has achieved a total return of 43%, which when compared to its peers and the S&P 500, isn’t very good. So on the surface, I realize it doesn’t appear to be a microcap that’s set to overachieve in the next 20 years.
However, the need for third-party logistics isn’t going away, and Echo Global Logistics is showing clear signs of strong financial performance. At some point, ECHO stock will start catching up in a hurry.