Third-Party Logistics (3PL) Company Valuations – December 2023

The logistics industry has evolved rapidly since 2020. From a global pandemic and broad shift of consumer spending to e-commerce to the supply chain disruption caused by the war in Ukraine and the rise of inflation and interest rates, the industry has innovated in order to maintain its competitiveness. These changes have been matched by the volatility in the valuations of 3PL companies and their financial performance. This article will discuss the factors that may have impacted valuations at the end of 2023.

This article updates our December 2022 analysis.

Important notes: This article examines potential driving factors for 3PL company valuations from a financial statement perspective. An actual business valuation requires an in-depth analysis of the business operations and associated risk factors that are not always evident from the data on financial statements. Also, to keep the length manageable, this article will focus on what the author interpreted as the primary value drivers. It will not touch on every observation in the data. For a quick read on the basic concepts of risk and return and how they apply in the context of this article, please visit: What is Value? and Risk and Return in the Market Approach.

The industry constituents for this analysis are listed below.

List of constituents analyzed in this article

Figure 1 summarizes three items for the 3PL companies:

  • Total enterprise value calculated as the sum of market capitalization and interest-bearing debt less cash;
  • Median revenues; and
  • Median earnings before interest, taxes, depreciation, and amortization (“EBITDA”).

The latest fiscal year is notated “LFY” (2022), while the latest 12 months is labeled “LTM” (latest available information as of December 29, 2023).

Fig. 1 - Trend of historical enterprise values, revenue, and EBITDA

After two years of revenue and EBITDA growth, industry performance contracted as economic headwinds challenged the industry. A sharp increase in inflation constricted demand for the industry and squeezed margins, particularly as fuel prices increased freight costs.

Despite industry-wide challenges in 2023, which resulted in declines in revenue and EBITDA, valuations remained resilient. We will examine the factors that may be impacting valuations at the end of 2023.

Valuation Multiples

Figures 2 and 3 provide a view of the historical trend in valuation multiples (revenue and EBITDA). In this case, revenue and EBITDA multiples generally follow the same trend observed in the 3PL companies’ historical enterprise values.

Fig. 2 – Trend of historical median revenue multiples
Fig. 3 – Trend of historical median EBITDA multiples


Valuation multiples increased in 2023, which makes sense given the rise in valuations and decline in financial performance as shown in Exhibit 1.

The Growth Story

Growth often has a strong influence on how companies are valued. We present a summary of the consensus forecasts for each group in Figures 4 and 5 below (note that “NFY” means next fiscal year; NFY = calendar 2023 for most companies). “Current year” means December 2023, while “prior year” means December 2022.

Fig. 4 – Comparison of historical and projected revenue growth: prior year vs. current year
Fig. 5 - Comparison of historical and projected EBITDA growth: prior year vs. current year


In Figure 4, the orange line represents data as of December 2022, and reflects optimism regarding revenue growth in 2023 followed by a decline in 2024. Expected revenue and EBITDA growth rates declined significantly from 2022 to 2023.

We also attempted to identify a meaningful correlation between growth and observed revenue and EBITDA multiples. NFY revenue and EBITDA multiples are plotted against projected NFY+1 growth rates in Figures 6 and 7.

Fig. 6 – Chart plotting revenue multiples against projected revenue growth rates
Fig. 7 – Chart plotting EBITDA multiples against projected EBITDA growth rates

We did not observe a meaningful relationship between expected growth rates and valuation multiples.

The Size Story

Larger companies are generally perceived to have lower levels of risk relative to smaller companies. This dynamic can be due to several factors, including improved product or geographic diversification, deeper management teams, access to various distribution channels, and better availability of capital.

Figure 8 presents the public 3PL companies’ size (measured by market capitalization) and LTM EBITDA multiples.

Fig. 8 – Chart plotting revenue multiples against market capitalization

Larger companies tended to trade at higher multiples than their smaller counterparts based on the data shown in Figure 8.

The Profitability Story

Revenue multiples are typically heavily influenced by profitability. We usually observe higher revenue multiples in companies with higher levels of profitability. This relationship appears to hold for the 3PL industry, as shown in Figure 9 below.

Fig. 9 – Chart plotting revenue multiples against EBITDA margins

In this case, there appears to be some correlation between revenue multiples and EBITDA margins. This observation would suggest that while profitability is likely influencing the magnitude of revenue multiples, other factors are impacting the valuations of the public 3PL companies.

The Leverage Story

We also considered the impact of financial leverage (or the companies’ use of debt) on the valuation multiples. Financial leverage is critical in measuring the risk of an equity investment in any company. Debt usage tends to increase financial risk to equity holders. Debt holders have a senior position within a company’s capital structure, and debt servicing occurs before any cash flow benefits (i.e., dividends) are issued to equity holders. Greater levels of perceived financial risk to equity holders tend to reduce valuation multiples.

Figure 10 plots the public 3PL companies’ debt-to-total capital ratios against their revenue multiples.

Fig. 10 – Chart plotting revenue multiples against debt-to-total capital ratios

In Figure 10, the most highly levered companies tended to trade at the lowest multiples. However, we noted some inconsistencies in the data points, such as XPO and GXO. This would suggest that investors are likely considering other factors when pricing companies in this industry.

Tying it All Together

As of December 2023, we noticed some correlation between valuation multiples and size, profitability, and leverage. Growth was noted to have little observed correlation to the magnitude of valuation multiples. A summary of these observations is presented below and compared to observations in December 2022.

Summary of how the various factors analyzed in this article were observed to impact valuation multiples

As discussed earlier, the industry is ever evolving, which has likely provoked a shift in investor orientation from growth to other factors, such as size, profitability, and financial strength. Companies that are larger, have higher margins, and are not saddled with significant debt tend to have the resources to make changes to maintain competitiveness in the market.

I hope you found this analysis helpful. Any input, feedback, suggestions, and questions (including disagreements with our high-level analysis) are welcome! Thanks for reading.