Research on insider transaction activity shows that insiders at small firms tend to earn greater profits from their purchases of company stock than insiders at large firms. This is due to the fact that smaller companies are less researched than larger companies, and consequently, less efficiently priced.
In this report, we are going to highlight some interesting insider buying at a small US company, P.A.M. Transportation Services Inc (PTSI:US). P.A.M. Transportation is a truckload transportation logistics company that has operations in the US, Canada, and Mexico. Its freight primarily consists of automotive parts, expedited goods, consumer goods, and manufactured goods, including heating and air conditioning units. The company is listed on the NASDAQ Global Market and currently has a market capitalization of $392 million.
P.A.M. Transportation Services Inc: Insider Buying
Our insider transaction data shows that on 5 August, Director W Scott Davis bought 2,000 PTSI shares at a price of $62.93 per share. This purchase – which cost the insider $125,857 – increased his holding by 17% to 14,049 shares.
This trade stands out for a couple of reasons. Firstly, Mr. Davis is an experienced investor. Previously, he was Senior Managing Director and founding partner of Rock Financial Partners, LLC – a private equity firm. Prior to Rock Financial Partners, Mr. Davis spent 19 years with Stephens Inc., a full-service investment bank. At Stephens, he served as Executive Vice President, Equity Capital Markets, with oversight responsibility for the origination and execution of all public offering transactions.
Secondly, Mr. Davis has made a number of well-timed purchases here over the last year. In January, for example, he picked up 1,000 shares at a price of $51. Since then, the stock has risen to near $70. Our Insider Model views his latest purchase as very bullish.
P.A.M. Transportation’s recent results for the quarter ended 30 June were strong.
For the period, total operating revenue amounted to $161.2 million, up from $93.0 million in Q2 2020. Meanwhile, net income came in at $15.3 million versus a net loss of $0.8 million a year earlier. Diluted earnings per share for the quarter were $2.66 versus -$0.14 in Q2 2020.
While PTSI stock has had a good run over the last year, rising from around $30 to near $70, it still looks cheap. Currently, the consensus earnings per share estimate for this year is $5.30, which puts the stock on a forward-looking P/E ratio of just 12.
The recent purchase from W Scott Davis suggests that he sees a lot of value at current levels. We view the insider buying activity here as a bullish indicator.