P.A.M. Transportation Services, Inc. (NASDAQ:PTSI) shareholders have seen the share price descend 21% over the month. But that doesn't undermine the fantastic longer term performance (measured over five years). Indeed, the share price is up a whopping 637% in that time. Arguably, the recent fall is to be expected after such a strong rise. But the real question is whether the business fundamentals can improve over the long term. We love happy stories like this one. The company should be really proud of that performance!
Since the stock has added US$92m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.
See our latest analysis for P.A.M. Transportation Services
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During five years of share price growth, P.A.M. Transportation Services achieved compound earnings per share (EPS) growth of 58% per year. So the EPS growth rate is rather close to the annualized share price gain of 49% per year. This indicates that investor sentiment towards the company has not changed a great deal. Rather, the share price has approximately tracked EPS growth.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. It might be well worthwhile taking a look at our free report on P.A.M. Transportation Services' earnings, revenue and cash flow.
A Different Perspective
It's nice to see that P.A.M. Transportation Services shareholders have received a total shareholder return of 103% over the last year. That gain is better than the annual TSR over five years, which is 49%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand P.A.M. Transportation Services better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with P.A.M. Transportation Services (at least 1 which doesn't sit too well with us) , and understanding them should be part of your investment process.