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Why We Like The Returns At P.A.M. Transportation Services (NASDAQ:PTSI)

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. 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?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the 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)

0.24 = US$131m ÷ (US$683m - US$128m) (Based on the trailing twelve months to June 2022).

So, P.A.M. Transportation Services has an ROCE of 24%. In absolute terms that's a great return and it's even better than the Transportation industry average of 15%.

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

roce
roce

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'd like to see what analysts are forecasting going forward, you should check out our free report for P.A.M. Transportation Services.

What Does the ROCE Trend For P.A.M. Transportation Services Tell Us?

P.A.M. Transportation Services is displaying some positive trends. The data shows that returns on capital have increased substantially over the last five years to 24%. The amount of capital employed has increased too, by 99%. So we're very much inspired by what we're seeing at P.A.M. Transportation Services thanks to its ability to profitably reinvest capital.

In Conclusion...

All in all, it's terrific to see that P.A.M. Transportation Services is reaping the rewards from prior investments and is growing its capital base. And a remarkable 354% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if P.A.M. Transportation Services can keep these trends up, it could have a bright future ahead.

On a separate note, we've found 1 warning sign for P.A.M. Transportation Services you'll probably want to know about.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high returns on equity.

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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