Intrinsic value of P.A.M. Transportation Services - PTSI

Previous Close

$28.00

  Intrinsic Value

$27.24

stock screener

  Rating & Target

hold

-3%

  Value-price divergence*

+11%

Previous close

$28.00

 
Intrinsic value

$27.24

 
Up/down potential

-3%

 
Rating

hold

 
Value-price divergence*

+11%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of PTSI stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 0.2

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  3.84
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  433
  442
  452
  463
  476
  491
  507
  524
  543
  563
  584
  608
  632
  658
  686
  716
  747
  781
  816
  853
  892
  933
  977
  1,023
  1,071
  1,122
  1,176
  1,233
  1,292
  1,355
  1,420
Variable operating expenses, $m
 
  405
  414
  425
  437
  450
  465
  481
  498
  516
  536
  557
  580
  604
  629
  657
  685
  716
  748
  782
  818
  856
  896
  938
  982
  1,029
  1,078
  1,130
  1,185
  1,242
  1,302
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  413
  405
  414
  425
  437
  450
  465
  481
  498
  516
  536
  557
  580
  604
  629
  657
  685
  716
  748
  782
  818
  856
  896
  938
  982
  1,029
  1,078
  1,130
  1,185
  1,242
  1,302
Operating income, $m
  20
  37
  38
  38
  40
  41
  42
  43
  45
  47
  49
  50
  52
  55
  57
  59
  62
  65
  68
  71
  74
  77
  81
  85
  89
  93
  98
  102
  107
  112
  118
EBITDA, $m
  59
  77
  78
  80
  83
  85
  88
  91
  94
  98
  101
  105
  110
  114
  119
  124
  130
  135
  141
  148
  155
  162
  169
  177
  186
  195
  204
  214
  224
  235
  246
Interest expense (income), $m
  4
  5
  5
  6
  6
  6
  6
  7
  7
  8
  8
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
Earnings before tax, $m
  18
  31
  32
  33
  34
  35
  36
  37
  38
  39
  41
  42
  44
  45
  47
  49
  51
  53
  55
  58
  60
  63
  65
  68
  71
  75
  78
  82
  85
  89
  93
Tax expense, $m
  7
  8
  9
  9
  9
  9
  10
  10
  10
  11
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
Net income, $m
  11
  23
  23
  24
  25
  25
  26
  27
  28
  29
  30
  31
  32
  33
  34
  36
  37
  39
  40
  42
  44
  46
  48
  50
  52
  54
  57
  60
  62
  65
  68

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  28
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  380
  359
  367
  377
  387
  399
  412
  426
  441
  458
  475
  494
  514
  535
  558
  582
  608
  635
  663
  693
  725
  759
  794
  832
  871
  912
  956
  1,002
  1,050
  1,101
  1,155
Adjusted assets (=assets-cash), $m
  352
  359
  367
  377
  387
  399
  412
  426
  441
  458
  475
  494
  514
  535
  558
  582
  608
  635
  663
  693
  725
  759
  794
  832
  871
  912
  956
  1,002
  1,050
  1,101
  1,155
Revenue / Adjusted assets
  1.230
  1.231
  1.232
  1.228
  1.230
  1.231
  1.231
  1.230
  1.231
  1.229
  1.229
  1.231
  1.230
  1.230
  1.229
  1.230
  1.229
  1.230
  1.231
  1.231
  1.230
  1.229
  1.230
  1.230
  1.230
  1.230
  1.230
  1.231
  1.230
  1.231
  1.229
Average production assets, $m
  270
  276
  282
  289
  297
  306
  316
  327
  339
  351
  365
  379
  394
  411
  428
  447
  466
  487
  509
  532
  557
  582
  610
  638
  668
  700
  734
  769
  806
  845
  886
Working capital, $m
  19
  45
  46
  47
  49
  50
  52
  53
  55
  57
  60
  62
  64
  67
  70
  73
  76
  80
  83
  87
  91
  95
  100
  104
  109
  114
  120
  126
  132
  138
  145
Total debt, $m
  178
  155
  161
  168
  176
  185
  194
  204
  215
  227
  240
  254
  269
  284
  301
  319
  337
  357
  378
  400
  424
  448
  474
  502
  530
  561
  593
  626
  662
  699
  738
Total liabilities, $m
  286
  263
  269
  276
  284
  293
  302
  312
  323
  335
  348
  362
  377
  392
  409
  427
  445
  465
  486
  508
  532
  556
  582
  610
  638
  669
  701
  734
  770
  807
  846
Total equity, $m
  94
  96
  98
  101
  103
  107
  110
  114
  118
  122
  127
  132
  137
  143
  149
  155
  162
  169
  177
  185
  194
  203
  212
  222
  233
  244
  255
  268
  280
  294
  308
Total liabilities and equity, $m
  380
  359
  367
  377
  387
  400
  412
  426
  441
  457
  475
  494
  514
  535
  558
  582
  607
  634
  663
  693
  726
  759
  794
  832
  871
  913
  956
  1,002
  1,050
  1,101
  1,154
Debt-to-equity ratio
  1.894
  1.620
  1.640
  1.670
  1.700
  1.730
  1.760
  1.800
  1.830
  1.860
  1.890
  1.930
  1.960
  1.990
  2.020
  2.050
  2.080
  2.110
  2.140
  2.160
  2.190
  2.210
  2.240
  2.260
  2.280
  2.300
  2.320
  2.340
  2.360
  2.380
  2.400
Adjusted equity ratio
  0.216
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  11
  23
  23
  24
  25
  25
  26
  27
  28
  29
  30
  31
  32
  33
  34
  36
  37
  39
  40
  42
  44
  46
  48
  50
  52
  54
  57
  60
  62
  65
  68
Depreciation, amort., depletion, $m
  39
  40
  41
  42
  43
  44
  46
  47
  49
  51
  53
  55
  57
  60
  62
  65
  68
  71
  74
  77
  81
  84
  88
  93
  97
  101
  106
  111
  117
  122
  128
Funds from operations, $m
  42
  63
  64
  66
  68
  70
  72
  74
  77
  79
  82
  86
  89
  93
  96
  100
  105
  109
  114
  119
  124
  130
  136
  142
  149
  156
  163
  171
  179
  188
  197
Change in working capital, $m
  -5
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
Cash from operations, $m
  47
  62
  63
  65
  66
  68
  70
  72
  75
  77
  80
  83
  86
  90
  94
  97
  102
  106
  110
  115
  120
  126
  132
  138
  144
  151
  158
  165
  173
  181
  190
Maintenance CAPEX, $m
  0
  -39
  -40
  -41
  -42
  -43
  -44
  -46
  -47
  -49
  -51
  -53
  -55
  -57
  -60
  -62
  -65
  -68
  -71
  -74
  -77
  -81
  -84
  -88
  -93
  -97
  -101
  -106
  -111
  -117
  -122
New CAPEX, $m
  -86
  -6
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -17
  -18
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -34
  -35
  -37
  -39
  -41
Cash from investing activities, $m
  -53
  -45
  -46
  -48
  -50
  -52
  -54
  -57
  -59
  -62
  -64
  -67
  -70
  -73
  -77
  -80
  -85
  -89
  -93
  -97
  -101
  -107
  -111
  -117
  -123
  -129
  -135
  -141
  -148
  -156
  -163
Free cash flow, $m
  -6
  17
  17
  17
  16
  16
  16
  16
  16
  16
  16
  16
  16
  16
  17
  17
  17
  18
  18
  18
  19
  19
  20
  21
  21
  22
  23
  24
  24
  25
  26
Issuance/(repayment) of debt, $m
  26
  5
  6
  7
  8
  9
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
  34
  35
  37
  39
Issuance/(repurchase) of shares, $m
  -21
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  5
  5
  6
  7
  8
  9
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
  29
  30
  32
  34
  35
  37
  39
Total cash flow (excl. dividends), $m
  0
  22
  23
  23
  24
  25
  25
  26
  27
  28
  29
  30
  31
  32
  33
  35
  36
  37
  39
  41
  42
  44
  46
  48
  50
  52
  55
  57
  60
  63
  66
Retained Cash Flow (-), $m
  8
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -9
  -10
  -11
  -11
  -12
  -12
  -13
  -14
  -14
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  21
  21
  21
  21
  22
  22
  22
  23
  23
  24
  25
  25
  26
  27
  28
  29
  30
  31
  32
  34
  35
  37
  38
  40
  41
  43
  45
  47
  49
  51
Discount rate, %
 
  7.20
  7.56
  7.94
  8.33
  8.75
  9.19
  9.65
  10.13
  10.64
  11.17
  11.73
  12.31
  12.93
  13.58
  14.26
  14.97
  15.72
  16.50
  17.33
  18.19
  19.10
  20.06
  21.06
  22.11
  23.22
  24.38
  25.60
  26.88
  28.22
  29.64
PV of cash for distribution, $m
 
  19
  18
  17
  15
  14
  13
  12
  11
  9
  8
  7
  6
  5
  5
  4
  3
  3
  2
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
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P.A.M. Transportation Services, Inc. is a holding company. The Company, through its subsidiaries, operates as a truckload transportation and logistics company. It operates in the motor carrier segment. It operates as a truckload dry van carrier transporting general commodities throughout the continental United States, as well as in certain Canadian provinces. It provides transportation services in Mexico under agreements with Mexican carriers. Its operations are classified into truckload services, or brokerage and logistics services. Truckload services include transportation services, in which it utilizes company owned trucks or independent operator owned trucks for the pickup and delivery of freight. The brokerage and logistics services consist of services, such as transportation scheduling, routing, mode selection, transloading and other services related to the transportation of freight, which may or may not involve the use of company owned or independent operator owned equipment.

FINANCIAL RATIOS  of  P.A.M. Transportation Services (PTSI)

Valuation Ratios
P/E Ratio 16.3
Price to Sales 0.4
Price to Book 1.9
Price to Tangible Book
Price to Cash Flow 3.8
Price to Free Cash Flow -4.6
Growth Rates
Sales Growth Rate 3.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -31.7%
Cap. Spend. - 3 Yr. Gr. Rate 3.6%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 133%
Total Debt to Equity 189.4%
Interest Coverage 6
Management Effectiveness
Return On Assets 3.6%
Ret/ On Assets - 3 Yr. Avg. 4.9%
Return On Total Capital 4.3%
Ret/ On T. Cap. - 3 Yr. Avg. 6.7%
Return On Equity 11.2%
Return On Equity - 3 Yr. Avg. 14.7%
Asset Turnover 1.2
Profitability Ratios
Gross Margin 74.1%
Gross Margin - 3 Yr. Avg. 74.1%
EBITDA Margin 14.1%
EBITDA Margin - 3 Yr. Avg. 15.2%
Operating Margin 4.6%
Oper. Margin - 3 Yr. Avg. 6.2%
Pre-Tax Margin 4.2%
Pre-Tax Margin - 3 Yr. Avg. 6%
Net Profit Margin 2.5%
Net Profit Margin - 3 Yr. Avg. 3.6%
Effective Tax Rate 38.9%
Eff/ Tax Rate - 3 Yr. Avg. 39.9%
Payout Ratio 0%

PTSI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PTSI stock intrinsic value calculation we used $433 million for the last fiscal year's total revenue generated by P.A.M. Transportation Services. The default revenue input number comes from 2016 income statement of P.A.M. Transportation Services. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our PTSI stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 7.2%, whose default value for PTSI is calculated based on our internal credit rating of P.A.M. Transportation Services, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of P.A.M. Transportation Services.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of PTSI stock the variable cost ratio is equal to 91.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for PTSI stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for P.A.M. Transportation Services.

Corporate tax rate of 27% is the nominal tax rate for P.A.M. Transportation Services. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the PTSI stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for PTSI are equal to 62.4%.

Life of production assets of 6.9 years is the average useful life of capital assets used in P.A.M. Transportation Services operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for PTSI is equal to 10.2%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $94 million for P.A.M. Transportation Services - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 6.505 million for P.A.M. Transportation Services is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of P.A.M. Transportation Services at the current share price and the inputted number of shares is $0.2 billion.

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COMPANY NEWS

▶ Transportation Stocks Keep Trucking Higher   [Oct-13-17 01:19PM  Zacks]
▶ P.A.M. Transportation posts 2Q profit   [Jul-27-17 03:50PM  Associated Press]
▶ P.A.M. Transportation posts 1Q profit   [Apr-27-17 05:44PM  Associated Press]
▶ P.A.M. Transportation posts 4Q profit   [02:46PM  Associated Press]
▶ Is KEYW Holding Corp. (KEYW) a Good Buy?   [Nov-29  10:45AM  at Insider Monkey]
▶ 10-Q for P.A.M. Transportation Services, Inc.   [Aug-10  08:13PM  at Company Spotlight]
▶ 6 Best Trucking Companies to Add to Your Portfolio   [May-15  08:47AM  at TheStreet]
▶ 10-K for P.A.M. Transportation Services, Inc.   [May-04  08:12PM  at Company Spotlight]
▶ 10-Q for P.A.M. Transportation Services, Inc.   [May-01  08:11PM  at Company Spotlight]
Financial statements of PTSI
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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