With EPS Growth And More, PAM Transportation Services (NASDAQ:PTSI) is interesting
It’s only natural that many investors, especially those new to the game, prefer to buy stocks in “sexy” stocks with a good history, even if those companies are losing money. But the reality is that when a company loses money every year, for long enough, its investors will usually take their share of those losses.
So if you’re like me, you might be more interested in profitable and growing companies, like WFP transportation services (NASDAQ: PTSI). Even if stocks are fully valued today, most capitalists would recognize its earnings as a demonstration of consistent value generation. Conversely, a loss-making business has yet to prove itself with profits, and eventually the sweet milk of outside capital can turn sour.
See our latest analysis for PAM Transportation Services
How fast are PAM transport services growing?
As one of my mentors once told me, stock price follows earnings per share (EPS). So it’s no surprise that I like investing in EPS growth companies. Who among us wouldn’t applaud PAM Transportation Services’ stratospheric annual EPS growth of 46%, compounded, over the past three years? Although this type of growth rate is not sustainable for long, it certainly catches my eye. like a crow with a sparkling stone.
A careful look at revenue growth and earnings before interest and tax (EBIT) margins can help inform a view on the sustainability of recent earnings growth. I note that the revenues of PAM Transportation Services operations was lower than its turnover over the last twelve months, which could distort my analysis of its margins. Shareholders of PAM Transportation Services can take comfort in the fact that EBIT margins have fallen from 7.6% to 15% and revenues are growing. Checking those two boxes is a good sign of growth, in my book.
You can check the company’s revenue and profit growth trend in the table below. To see the actual numbers, click on the chart.
While it’s always good to see growing profits, you should always remember that a weak balance sheet could come back strong. So check the strength of PAM Transportation Services’ balance sheet, before you get too excited.
Are PAM Transportation Services insiders aligned with all shareholders?
Like kids on the street standing up for what they believe in, insider stock buying gives me reason to believe in a better future. Indeed, insider buying often indicates that those closest to the company are confident that the stock price will perform well. However, insiders are sometimes wrong and we don’t know the exact logic behind their acquisitions.
Like a strong phalanx, PAM Transportation Services insiders have remained united in refusing to sell stock over the past year. But the biggest problem is that the independent director, W. Davis, paid US$126,000 to buy shares at an average price of US$15.73.
And insider buying isn’t the only sign of alignment between shareholders and the board, as insiders at PAM Transportation Services own more than a third of the company. Indeed, with a collective 70% ownership, company insiders control and have a lot of capital behind the company. This makes me think they will be incentivized to plan for the long term – something I like to see. And their stake is extremely valuable at the current share price, totaling US$416 million. This means that they have a lot of their own capital depending on the performance of the business!
While insiders are apparently happy to hold and accumulate stocks, that’s only part of the pretty picture. Indeed, according to our analysis, the CEO, Joseph Vitiritto, is paid less than the median of companies of similar size. I found that the median total compensation for CEOs of companies like PAM Transportation Services with market caps between $200 million and $800 million is around $2.7 million.
PAM Transportation Services offered total compensation worth US$1.5 million to its CEO during the year at . That seems pretty reasonable, especially given that it’s below the median for companies of a similar size. CEO compensation isn’t the most important aspect of a company to consider, but when it’s reasonable, it gives me a bit more confidence that executives are looking out for shareholders’ interests. It can also be a sign of good governance more generally.
Are PAM Transport Services Worth Watching?
PAM Transportation Services’ earnings per share growth is levitating, like a mountain goat climbing the Alps. The icing on the cake is that insiders own a bunch of stocks, and one buys more. This quick overview suggests that the company may be in good shape, and also at an inflection point, so perhaps PAM Transportation Services deserves some timely attention. What about the risks? Every business has them, and we’ve spotted 3 warning signs for PAM Transportation Services (1 of which is potentially serious!) that you should know about.
There are many other companies whose insiders buy shares. So if you like the sound of PAM Transportation Services, you’ll probably love this free list of growing companies insiders are buying.
Please note that insider trading discussed in this article refers to reportable trading in the relevant jurisdiction.
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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.