PAM Transportation Services, Inc. (NASDAQ:PTSI) Stocks Are on an Uptrend: Are Strong Financials Driving the Market?

Most readers will already know that shares of PAM Transportation Services (NASDAQ:PTSI) have risen a significant 18% over the past three months. Given the company’s impressive performance, we decided to take a closer look at its financial metrics, as a company’s long-term financial health usually dictates market outcomes. Specifically, we decided to study the ROE of PAM Transportation Services in this article.

Return on equity or ROE is an important factor for a shareholder to consider as it tells them how much of their capital is being reinvested. In short, ROE shows the profit that each dollar generates in relation to the investments of its shareholders.

See our latest analysis for PAM Transportation Services

How do you calculate return on equity?

ROE can be calculated using the formula:

Return on equity = Net income (from continuing operations) ÷ Equity

So, based on the above formula, the ROE for PAM Transportation Services is:

37% = $97 million ÷ $262 million (based on trailing 12 months to June 2022).

The “yield” is the profit of the last twelve months. So, this means that for every $1 of investment by its shareholder, the company generates a profit of $0.37.

What is the relationship between ROE and earnings growth?

We have already established that ROE serves as an effective profit-generating indicator for a company’s future earnings. Based on the share of its profits that the company chooses to reinvest or “keep”, we are then able to assess a company’s future ability to generate profits. Assuming all else is equal, companies that have both a higher return on equity and better earnings retention are generally the ones with a higher growth rate compared to companies that don’t. same characteristics.

A side-by-side comparison of PAM Transportation Services earnings growth and 37% ROE

First of all, we appreciate the fact that PAM Transportation Services has an impressive ROE. Second, a comparison with the average industry-reported ROE of 26% is also not lost on us. Under these circumstances, a considerable growth in the net profit of PAM Transportation Services of 25% over five years was to be expected.

Then, comparing with the industry net income growth, we found that the growth of PAM Transportation Services is quite high compared to the average industry growth of 7.7% over the same period, which is great to see.

NasdaqGM: PTSI Past Earnings Growth September 13, 2022

Earnings growth is an important factor in stock valuation. The investor should try to establish whether the expected growth or decline in earnings, as the case may be, is taken into account. By doing so, he will get an idea if the title is heading for clear blue waters or if swampy waters await. Is PAM Transportation Services correctly valued compared to other companies? These 3 assessment metrics might help you decide.

Does PAM Transportation Services use its profits efficiently?

Since PAM Transportation Services pays no dividends to its shareholders, we infer that the company has reinvested all of its earnings to grow its business.

Summary

Overall, we believe the performance of PAM Transportation Services has been quite good. In particular, it is good to see that the company is investing heavily in its business and, along with a high rate of return, this has resulted in significant growth in its profits. If the company continues to increase earnings as it has, it could have a positive impact on its share price given how earnings per share influence prices over the long term. Remember that the price of a stock also depends on the perceived risk. Therefore, investors should be aware of the risks involved before investing in a company. To learn about the 1 risk we have identified for PAM Transportation Services, visit our risk dashboard for free.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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