Improved Revenues Required Before P.A.M. Transportation Services, Inc. (NASDAQ:PTSI) Shares Find Their Feet

You may think that with a price-to-sales (or "P/S") ratio of 0.6x P.A.M. Transportation Services, Inc. (NASDAQ:PTSI) is a stock worth checking out, seeing as almost half of all the Transportation companies in the United States have P/S ratios greater than 1.3x and even P/S higher than 5x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

View our latest analysis for P.A.M. Transportation Services

What Does P.A.M. Transportation Services' Recent Performance Look Like?

P.A.M. Transportation Services could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Want the full picture on analyst estimates for the company? Then our free report on P.A.M. Transportation Services will help you uncover what's on the horizon.

Is There Any Revenue Growth Forecasted For P.A.M. Transportation Services?

In order to justify its P/S ratio, P.A.M. Transportation Services would need to produce sluggish growth that's trailing the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 19%. This has soured the latest three-year period, which nevertheless managed to deliver a decent 30% overall rise in revenue. Accordingly, while they would have preferred to keep the run going, shareholders would be roughly satisfied with the medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 4.6% as estimated by the lone analyst watching the company. That's shaping up to be materially lower than the 8.2% growth forecast for the broader industry.

With this information, we can see why P.A.M. Transportation Services is trading at a P/S lower than the industry. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What Does P.A.M. Transportation Services' P/S Mean For Investors?

While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

As expected, our analysis of P.A.M. Transportation Services' analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

We don't want to rain on the parade too much, but we did also find 4 warning signs for P.A.M. Transportation Services (1 shouldn't be ignored!) that you need to be mindful of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.