For the most part, the transports have all responded well to the bounce in economic activity. Railroads like Union Pacific (NYSE: UNP) and Canadian National (NYSE: CNI), package handlers like UPS (NYSE: UPS) and truckers like Old Dominion (Nasdaq: ODFL) have all rebounded solidly over the past year or so. Then there is logistics specialist UTi Worldwide (Nasdaq: UTIW). Although air and sea-going traffic have picked up, this stock has not gone along for the ride with the rest of the transports.

Does this make it an underappreciated bargain, or is there a reason it should be a laggard? Let us investigate.

IN PICTURES: 8 Transport Stocks Gaining Momentum

The Quarter That Was
There were definitely signs of life in UTIW's quarterly report. Gross revenue rose 37%, though that dropped to 12% net revenue growth due to higher transport costs. Interestingly, air freight and ocean-going revenue were more or less equally strong at the gross revenue level, with 55% and 48% growth, respectively. Logistics and distribution revenue growth was lighter, though, at about 14%, and the company seems to be having a bit of trouble passing on rate increases.

Gross profits rose about 12% this quarter, but UTIW regained a lot of leverage at the operating line. Operating income grew more than 51% as the company managed to hold its increase in operating expenses to a single-digit rate. Here is one of the potentially interesting aspects of UTIW as a stock. Although the company has historically been less efficient than rival Expeditors International (Nasdaq: EXPD), it should be able to produce better incremental leverage during this recovery.

The Road Ahead
Strong pricing in the transport market is usually a trigger for suppliers (that is, truckers, airlines and ocean freight companies) to put more capacity back into the market. That should be good news for UTIW in the coming quarters, as it should mean that cost increases fade from here. That probably will not surprise shareholders in container ship companies like Seaspan (NYSE: SSW), where the back-and-forth movement between rates and capacity is a known source of volatility.

Longer term, UTIW should benefit from an ongoing (if erratic) global economic recovery and the ongoing globalization of trade. It may be cliché to mention it again, but UTIW certainly stands to benefit from the fact that getting goods from "here" to "there" is increasingly complicated. Companies are looking to source from multiple countries, assemble in yet another country and then ship to a whole different list of countries. While UPS and FedEx (NYSE: FDX) both appear eager to increase their efforts in the global logistics market, there will be plenty of business for the likes of UTIW, Expeditors, Panalpina and Keuhne & Nagel, as they are positioned for a different set of transport services to global businesses.

The Bottom Line
On the basis of simple ratio analysis, UTIW does not generally get much cheaper than this. Moreover, taking a quick look at the stock's chart, it is clear that the stock fell hard into the recession and has not bounced too strongly off the bottom. Although this stock is likely to be vulnerable to intermittent worries about a slowdown in global growth, it seems unreasonable that it should be left out of the global transports rally. Truckers and railroads will likely maintain better momentum in the short run, but investors looking for an undervalued option to play the ongoing recovery should take a serious look at UTi Worldwide. (For more, see our article 8 Transport Stocks Gaining Momentum.)

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