Stock Analysis

Is Now The Time To Put P.A.M. Transportation Services (NASDAQ:PTSI) On Your Watchlist?

Source: Shutterstock

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

In contrast to all that, many investors prefer to focus on companies like P.A.M. Transportation Services (NASDAQ:PTSI), which has not only revenues, but also profits. While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

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

How Fast Is P.A.M. Transportation Services Growing Its Earnings Per Share?

P.A.M. Transportation Services has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. Thus, it makes sense to focus on more recent growth rates, instead. It's good to see that P.A.M. Transportation Services' EPS has grown from US$3.37 to US$4.09 over twelve months. This amounts to a 21% gain; a figure that shareholders will be pleased to see.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Not all of P.A.M. Transportation Services' revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. P.A.M. Transportation Services maintained stable EBIT margins over the last year, all while growing revenue 34% to US$947m. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

NasdaqGM:PTSI Earnings and Revenue History March 16th 2023

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check P.A.M. Transportation Services' balance sheet strength, before getting too excited.

Are P.A.M. Transportation Services Insiders Aligned With All Shareholders?

Seeing insiders owning a large portion of the shares on issue is often a good sign. Their incentives will be aligned with the investors and there's less of a probability in a sudden sell-off that would impact the share price. So as you can imagine, the fact that P.A.M. Transportation Services insiders own a significant number of shares certainly is appealing. Indeed, with a collective holding of 72%, company insiders are in control and have plenty of capital behind the venture. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. That level of investment from insiders is nothing to sneeze at.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? A brief analysis of the CEO compensation suggests they are. Our analysis has discovered that the median total compensation for the CEOs of companies like P.A.M. Transportation Services with market caps between US$400m and US$1.6b is about US$3.8m.

The CEO of P.A.M. Transportation Services only received US$1.5m in total compensation for the year ending December 2021. That's clearly well below average, so at a glance that arrangement seems generous to shareholders and points to a modest remuneration culture. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.

Does P.A.M. Transportation Services Deserve A Spot On Your Watchlist?

One important encouraging feature of P.A.M. Transportation Services is that it is growing profits. The fact that EPS is growing is a genuine positive for P.A.M. Transportation Services, but the pleasant picture gets better than that. With company insiders aligning themselves considerably with the company's success and modest CEO compensation, there's no arguments that this is a stock worth looking into. Still, you should learn about the 2 warning signs we've spotted with P.A.M. Transportation Services (including 1 which is a bit unpleasant).

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a free list of them here.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Valuation is complex, but we're helping make it simple.

Find out whether P.A.M. Transportation Services is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis