Stock Analysis

Returns On Capital Are A Standout For P.A.M. Transportation Services (NASDAQ:PTSI)

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NasdaqGM:PTSI
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If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Speaking of which, we noticed some great changes in P.A.M. Transportation Services' (NASDAQ:PTSI) returns on capital, so let's have a look.

Return On Capital Employed (ROCE): What is it?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on P.A.M. Transportation Services is:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.22 = US$116m ÷ (US$664m - US$129m) (Based on the trailing twelve months to March 2022).

Therefore, P.A.M. Transportation Services has an ROCE of 22%. That's a fantastic return and not only that, it outpaces the average of 14% earned by companies in a similar industry.

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

roce
NasdaqGM:PTSI Return on Capital Employed July 20th 2022

Above you can see how the current ROCE for P.A.M. Transportation Services compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

What Can We Tell From P.A.M. Transportation Services' ROCE Trend?

The trends we've noticed at P.A.M. Transportation Services are quite reassuring. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 22%. Basically the business is earning more per dollar of capital invested and in addition to that, 86% more capital is being employed now too. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

In Conclusion...

To sum it up, P.A.M. Transportation Services has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Since the stock has returned a staggering 577% to shareholders over the last five years, it looks like investors are recognizing these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

P.A.M. Transportation Services does come with some risks though, we found 2 warning signs in our investment analysis, and 1 of those can't be ignored...

P.A.M. Transportation Services is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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.

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About NasdaqGM:PTSI

P.A.M. Transportation Services

P.A.M. Transportation Services, Inc., through its subsidiaries, operates as a truckload transportation and logistics company in the United States, Mexico, and Canada.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation4
Future Growth0
Past Performance6
Financial Health4
Dividends0

Read more about these checks in the individual report sections or in our analysis model.

Outstanding track record and good value.