Is Now An Opportune Moment To Examine P.A.M. Transportation Services, Inc. (NASDAQ:PTSI)?

P.A.M. Transportation Services, Inc. (NASDAQ:PTSI), is not the largest company out there, but it received a lot of attention from a substantial price increase on the NASDAQGM over the last few months. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Today I will analyse the most recent data on P.A.M. Transportation Services’s outlook and valuation to see if the opportunity still exists.

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

What's The Opportunity In P.A.M. Transportation Services?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that P.A.M. Transportation Services’s ratio of 8.21x is trading slightly below its industry peers’ ratio of 9.46x, which means if you buy P.A.M. Transportation Services today, you’d be paying a reasonable price for it. And if you believe P.A.M. Transportation Services should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. Is there another opportunity to buy low in the future? Since P.A.M. Transportation Services’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from P.A.M. Transportation Services?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Though in the case of P.A.M. Transportation Services, it is expected to deliver a negative earnings growth of -3.7%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? Currently, PTSI appears to be trading around industry price multiples, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on PTSI, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on PTSI for a while, now may not be the most optimal time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystallize your views on PTSI should the price fluctuate below the industry PE ratio.

If you'd like to know more about P.A.M. Transportation Services as a business, it's important to be aware of any risks it's facing. At Simply Wall St, we found 1 warning sign for P.A.M. Transportation Services and we think they deserve your attention.

If you are no longer interested in P.A.M. Transportation Services, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.