Is the Transurban Group (ASX: TCL) share price a buy?
I'm always open to the idea of buying quality shares when they're trading at a lower price, but Transurban is close to its all-time high price right now. Since the start of October 2018 it has risen about 12.7%, which is a quick recovery for a defensive business like Transurban.
However, I think Forager Australian Shares Fund's (ASX: FOR) Steve Johnson raised a good point when he recently questioned if toll roads are actually that defensive.
In the current environment where the unemployment rate just hit a low of 5% there's going to be a lot of people travelling around for work, it makes sense to get to your next location as quickly as possible.
However, if money is tighter or if a toll user is unemployed, will they really decide to go on a toll road shave a few minutes off their travel time? I'm not sure, it's an interesting question to consider.
Transurban is still delivering growth, so there aren't any economic worries at the moment. In the September 2018 quarter Sydney average daily traffic increased by 2.5%, with average workday traffic increasing by 2.8%.
In that same quarter, Melbourne average daily traffic increased by 5.5% with workday traffic increasing 5.4%. Brisbane average daily traffic grew by 0.6% with workday traffic growing by 1.4%.
North American traffic is also showing long-term growth potential, but it's the key Australian roads that are the key to profit growth as they're the biggest contributors.
In Sydney, WestConnex could be a big earner for Transurban in the future.
Over the longer-term, some investors have raised the idea that automated cars could be a net negative for toll road operators like Transurban.
Foolish takeaway
Transurban is currently trading at 70x FY19's estimated earnings with a distribution yield of 4.7%. With a high level of debt and Transurban trading at near all-time highs, I don't think I could call Transurban a buy at the current price.
