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

Previous Close

$17.26

  Intrinsic Value

$28.44

stock screener

  Rating & Target

str. buy

+65%

  Value-price divergence*

+503%

Previous close

$17.26

 
Intrinsic value

$28.44

 
Up/down potential

+65%

 
Rating

str. buy

 
Value-price divergence*

+503%

*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 0.1

 

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
  4.80
  4.82
  4.84
  4.85
  4.87
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
  4.95
  4.95
  4.96
  4.96
  4.97
  4.97
  4.97
  4.98
  4.98
  4.98
  4.98
  4.98
  4.99
  4.99
  4.99
  4.99
  4.99
Revenue, $m
  433
  454
  476
  499
  523
  548
  575
  603
  633
  664
  697
  731
  767
  805
  845
  887
  931
  977
  1,025
  1,076
  1,130
  1,186
  1,245
  1,307
  1,372
  1,441
  1,512
  1,588
  1,667
  1,750
  1,838
Variable operating expenses, $m
 
  416
  436
  457
  479
  503
  527
  553
  580
  609
  639
  670
  703
  738
  775
  813
  853
  896
  940
  987
  1,036
  1,088
  1,142
  1,199
  1,258
  1,321
  1,387
  1,456
  1,529
  1,605
  1,685
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
  416
  436
  457
  479
  503
  527
  553
  580
  609
  639
  670
  703
  738
  775
  813
  853
  896
  940
  987
  1,036
  1,088
  1,142
  1,199
  1,258
  1,321
  1,387
  1,456
  1,529
  1,605
  1,685
Operating income, $m
  20
  38
  39
  41
  43
  46
  48
  50
  53
  55
  58
  61
  64
  67
  70
  74
  77
  81
  85
  89
  94
  98
  103
  108
  114
  120
  126
  132
  138
  145
  153
EBITDA, $m
  59
  66
  69
  73
  76
  80
  84
  88
  92
  97
  101
  106
  112
  117
  123
  129
  135
  142
  149
  156
  164
  172
  181
  190
  200
  209
  220
  231
  242
  254
  267
Interest expense (income), $m
  4
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  28
  29
  31
  33
Earnings before tax, $m
  18
  32
  34
  35
  37
  38
  40
  42
  44
  46
  48
  50
  52
  55
  57
  60
  63
  65
  69
  72
  75
  79
  82
  86
  90
  95
  99
  104
  109
  114
  120
Tax expense, $m
  7
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  26
  27
  28
  29
  31
  32
Net income, $m
  11
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  36
  38
  40
  42
  44
  46
  48
  50
  52
  55
  57
  60
  63
  66
  69
  72
  76
  80
  83
  87

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
  369
  387
  405
  425
  446
  468
  490
  514
  540
  566
  594
  624
  654
  687
  721
  757
  794
  834
  875
  919
  964
  1,012
  1,063
  1,116
  1,171
  1,230
  1,291
  1,355
  1,423
  1,494
Adjusted assets (=assets-cash), $m
  352
  369
  387
  405
  425
  446
  468
  490
  514
  540
  566
  594
  624
  654
  687
  721
  757
  794
  834
  875
  919
  964
  1,012
  1,063
  1,116
  1,171
  1,230
  1,291
  1,355
  1,423
  1,494
Revenue / Adjusted assets
  1.230
  1.230
  1.230
  1.232
  1.231
  1.229
  1.229
  1.231
  1.232
  1.230
  1.231
  1.231
  1.229
  1.231
  1.230
  1.230
  1.230
  1.230
  1.229
  1.230
  1.230
  1.230
  1.230
  1.230
  1.229
  1.231
  1.229
  1.230
  1.230
  1.230
  1.230
Average production assets, $m
  270
  283
  297
  311
  326
  342
  359
  376
  395
  414
  435
  456
  479
  502
  527
  553
  581
  610
  640
  672
  705
  740
  777
  816
  856
  899
  944
  991
  1,040
  1,092
  1,147
Working capital, $m
  19
  46
  49
  51
  53
  56
  59
  62
  65
  68
  71
  75
  78
  82
  86
  90
  95
  100
  105
  110
  115
  121
  127
  133
  140
  147
  154
  162
  170
  179
  187
Total debt, $m
  178
  162
  175
  189
  204
  219
  235
  251
  269
  288
  307
  328
  349
  372
  395
  420
  447
  474
  503
  533
  565
  599
  634
  671
  710
  750
  793
  838
  885
  935
  987
Total liabilities, $m
  286
  270
  283
  297
  312
  327
  343
  359
  377
  396
  415
  436
  457
  480
  503
  528
  555
  582
  611
  641
  673
  707
  742
  779
  818
  858
  901
  946
  993
  1,043
  1,095
Total equity, $m
  94
  99
  103
  108
  114
  119
  125
  131
  137
  144
  151
  159
  167
  175
  183
  192
  202
  212
  223
  234
  245
  257
  270
  284
  298
  313
  328
  345
  362
  380
  399
Total liabilities and equity, $m
  380
  369
  386
  405
  426
  446
  468
  490
  514
  540
  566
  595
  624
  655
  686
  720
  757
  794
  834
  875
  918
  964
  1,012
  1,063
  1,116
  1,171
  1,229
  1,291
  1,355
  1,423
  1,494
Debt-to-equity ratio
  1.894
  1.650
  1.700
  1.750
  1.790
  1.840
  1.880
  1.920
  1.960
  2.000
  2.030
  2.060
  2.100
  2.130
  2.160
  2.180
  2.210
  2.240
  2.260
  2.280
  2.300
  2.330
  2.350
  2.360
  2.380
  2.400
  2.420
  2.430
  2.450
  2.460
  2.470
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
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  36
  38
  40
  42
  44
  46
  48
  50
  52
  55
  57
  60
  63
  66
  69
  72
  76
  80
  83
  87
Depreciation, amort., depletion, $m
  39
  28
  30
  31
  33
  34
  36
  38
  39
  41
  43
  46
  48
  50
  53
  55
  58
  61
  64
  67
  70
  74
  78
  82
  86
  90
  94
  99
  104
  109
  115
Funds from operations, $m
  42
  52
  54
  57
  59
  62
  65
  68
  71
  75
  78
  82
  86
  90
  94
  99
  104
  109
  114
  120
  125
  131
  138
  145
  152
  159
  167
  175
  184
  193
  202
Change in working capital, $m
  -5
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
Cash from operations, $m
  47
  50
  52
  55
  57
  60
  62
  65
  68
  72
  75
  79
  82
  86
  90
  95
  99
  104
  109
  114
  120
  126
  132
  138
  145
  152
  160
  167
  176
  184
  193
Maintenance CAPEX, $m
  0
  -27
  -28
  -30
  -31
  -33
  -34
  -36
  -38
  -39
  -41
  -43
  -46
  -48
  -50
  -53
  -55
  -58
  -61
  -64
  -67
  -70
  -74
  -78
  -82
  -86
  -90
  -94
  -99
  -104
  -109
New CAPEX, $m
  -86
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -52
  -55
Cash from investing activities, $m
  -53
  -40
  -42
  -44
  -46
  -49
  -51
  -54
  -56
  -58
  -61
  -64
  -69
  -72
  -75
  -79
  -82
  -87
  -91
  -96
  -100
  -105
  -111
  -117
  -123
  -129
  -135
  -141
  -148
  -156
  -164
Free cash flow, $m
  -6
  10
  10
  10
  11
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  16
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
Issuance/(repayment) of debt, $m
  26
  12
  13
  14
  14
  15
  16
  17
  18
  19
  19
  20
  22
  23
  24
  25
  26
  28
  29
  30
  32
  34
  35
  37
  39
  41
  43
  45
  47
  50
  52
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
  12
  13
  14
  14
  15
  16
  17
  18
  19
  19
  20
  22
  23
  24
  25
  26
  28
  29
  30
  32
  34
  35
  37
  39
  41
  43
  45
  47
  50
  52
Total cash flow (excl. dividends), $m
  0
  22
  23
  24
  25
  26
  27
  29
  30
  31
  33
  34
  36
  37
  39
  41
  43
  45
  47
  49
  51
  54
  56
  59
  62
  65
  68
  71
  74
  78
  82
Retained Cash Flow (-), $m
  8
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
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
 
  18
  18
  19
  20
  21
  22
  23
  23
  24
  26
  27
  28
  29
  30
  32
  33
  35
  36
  38
  40
  41
  43
  45
  47
  50
  52
  54
  57
  60
  63
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
 
  16
  16
  15
  14
  14
  13
  12
  11
  10
  9
  8
  7
  6
  5
  4
  4
  3
  2
  2
  1
  1
  1
  1
  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
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

P.A.M. Transportation Services, Inc., through its subsidiaries, operates as a truckload transportation and logistics company in the United States, Canada, and Mexico. The company is involved in the transportation of general commodities. Its freight primarily consists of automotive parts; expedited goods; and consumer goods, including general retail store merchandise, as well as manufactured goods, such as heating and air conditioning units. The company also offers brokerage and logistics services, such as transportation scheduling, routing, mode selection, transloading, and other services related to the transportation of freight. As of December 31, 2015, it operated a fleet of 1,860 trucks, which includes 462 trucks leased under operating leases and 482 independent contractor trucks; and 4,983 trailers comprising 80 trailers leased under operating leases. The company was founded in 1979 and is headquartered in Tontitown, Arkansas.

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

Valuation Ratios
P/E Ratio 10
Price to Sales 0.3
Price to Book 1.2
Price to Tangible Book
Price to Cash Flow 2.4
Price to Free Cash Flow -2.8
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 4.8% 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 10 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 6.175 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 $0.1 billion.

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COMPANY NEWS

▶ 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]
▶ 10-Q for P.A.M. Transportation Services, Inc.   [Nov-10  07:08PM  Company Spotlight]
Stock chart of PTSI 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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