Shares of American innovative logistics solutions company ArcBest (US:ARCB) moved 17.4% higher on Tuesday after the market became aware of a new stake in the company by Canadian competitor TFI Industries (CA:TFII).

ARCB shares were trading broadly flat on a 1 year view, with the rally pushing gains to around 16% for the year.

It was not the usual securities regulatory filing that revealed the stake but instead noted within TFI Industries fourth quarter results filing.

In the filing, TFI disclosed the ownership of 1,027,696 shares in ArcBest equating to around 4% ownership of the float.

TFI’s management was asked about the stake on the earnings call by analysts following the result and responded stating  “we really like this company” and went on to explain that the company wants to have discussions with ARCB’s management at some point in the future.

TFI believes that as ArcBest is a unionized carrier, they believe there are improvements that could be made such as company expenses that could be reduced over time if the companies could work together. As an example, TFI management discussed an example that could be to sell unused excess real estate within TForce Freight to ArcBest.

TD Securities analyst Tim James highlighted to investors in a report that if a TFI acquisition of ARCB was considered, ArcBest would fit in well with the company because of factors including the margin profile, US LTL exposure and attractive stock valuation. (The analyst reiterated that the firm was not speculating on the probability of a transaction).

When taking a deeper look at ArcBest as an investment, research from the Fintel platform highlighted the stock ranks highly on the QVM (quality, value, momentum) quant screen.

ARCB has a score of 87.18 which ranks the company in 55th spot globally. The stock has risen 38 ranks over the last week, boosted by the share price momentum.

The QVM score includes a high quality score of 89.77 based on growing levels of cash generation from operating activities. Cash generation on a 1 year basis is currently at its highest level in 5 years.

During ARCB’s fourth quarter, the company generated $248.3 million in cash from operating activities, which rose from $190.3 million in the same quarter of 2021.

The second factor included in the QVM score is a value score of 86.15. Despite shares trading near all-time highs, the stock continues to trade on an undemanding price to earnings ratio of 8.67x (based on the previous closing price).

Fintel likes the stock on an EBIT to EV (EBIT/EV) valuation which has grown substantially over 2022.

The final factor in the QVM score is the momentum score of 49.33. While this score is the lowest of the three and drags down the overall QVM rank, recent momentum will push the score higher over the next week.

More information on the QVM score:

Fintel’s QVM Score factor combines the three Fintel factors Quality Score, Value Score, and Momentum Score into a single score. The score ranges from zero to 100.

• The quality score focuses on a stock’s cash flow generating abilities from current operations.
• The value score ranks companies based on their relative valuation to the market.
• The momentum score factors the share price performance over the last 6 months.

This article originally appeared on Fintel

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