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Should You Investigate P.A.M. Transportation Services, Inc. (NASDAQ:PTSI) At US$26.38?

P.A.M. Transportation Services, Inc. (NASDAQ:PTSI), is not the largest company out there, but it saw significant share price movement during recent months on the NASDAQGM, rising to highs of US$33.57 and falling to the lows of US$26.38. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether P.A.M. Transportation Services' current trading price of US$26.38 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at P.A.M. Transportation Services’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

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 5.82x is trading slightly below its industry peers’ ratio of 10.05x, which means if you buy P.A.M. Transportation Services today, you’d be paying a decent price for it. And if you believe that P.A.M. Transportation Services should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Although, there may be an opportunity to buy in the future. This is because P.A.M. Transportation Services’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What kind of growth will P.A.M. Transportation Services generate?

earnings-and-revenue-growth
earnings-and-revenue-growth

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. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a relatively muted revenue growth of 4.5% expected in the upcoming year, short term growth doesn’t seem like a key driver for a buy decision for P.A.M. Transportation Services.

What This Means For You

Are you a shareholder? It seems like the market has already priced in PTSI’s growth outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at PTSI? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

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Are you a potential investor? If you’ve been keeping an eye on PTSI, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing P.A.M. Transportation Services at this point in time. You'd be interested to know, that we found 1 warning sign for P.A.M. Transportation Services and you'll want to know about it.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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