====== Revenue Per Ton-Mile ======
Revenue Per Ton-Mile is a key performance metric used primarily in the freight and transportation industries, such as trucking and railroads. Think of it as the price tag for moving one ton of goods over one mile. It's calculated by taking a company's total freight [[Revenue]] and dividing it by the total number of [[Ton-Mile]]s it transported in a period. A [[Ton-Mile]] itself is the fundamental unit of production for a freight company: moving one ton of freight a distance of one mile. This single metric offers a powerful snapshot of a company's earning power on a per-unit basis, helping investors quickly gauge its [[Pricing Power]] and the value of the services it provides. A higher Revenue Per Ton-Mile generally indicates that a company can command better prices for its shipping services.
===== Why Is Revenue Per Ton-Mile Important for Investors? =====
For an investor, Revenue Per Ton-Mile (often abbreviated as RPTM) is more than just a piece of industry jargon; it’s a window into the health and strategy of a transportation business. It helps you look past the headline revenue numbers and understand the underlying quality of a company's earnings.
==== Gauging Pricing Power ====
A steadily increasing RPTM is a fantastic sign. It suggests the company has a strong [[Competitive Advantage]], or [[Moat]], that allows it to raise prices without losing customers. This could be due to several factors:
  * **High Demand:** The economy is strong, and there's more freight than trucks or trains to move it.
  * **Specialized Services:** The company might be moving high-value goods (like pharmaceuticals or electronics) or hazardous materials, which command premium shipping rates compared to bulk commodities like coal or gravel.
  * **Limited Competition:** The company may operate in a region with few competitors, giving it more control over pricing.
A rising RPTM often translates directly into higher profitability, which is music to a [[Value Investor]]'s ears.
==== Assessing the Business Mix ====
A significant change in RPTM can also signal a strategic shift in the types of goods the company is transporting. For example, if a railroad's RPTM jumps significantly in one year, it might have won a new contract to transport finished automobiles (high RPTM) and is transporting less coal (low RPTM). This tells you about the company's direction and its changing exposure to different sectors of the economy.
==== A Powerful Metric, But Not a Solo Act ====
While RPTM tells you about revenue, it says nothing about expenses. To get a complete picture of profitability, you must look at it alongside its sibling metric: [[Cost Per Ton-Mile]] (CPTM). CPTM tells you how much it costs the company to move that same ton of freight one mile.
The real insight comes from the spread between the two: **RPTM - CPTM = Profit Per Ton-Mile**.
A company that can consistently increase its RPTM while keeping its CPTM stable or decreasing it is a highly efficient and profitable machine. This widening spread is a clear indicator of an expanding [[Operating Margin]] on its core business activity.
===== Practical Application for Value Investors =====
==== Comparing Companies ====
You can use RPTM to compare similar companies. If two major U.S. railroads have vastly different RPTMs, your job as an analyst is to find out why. Does one have a better route network? Does it carry more profitable goods? Answering these questions can reveal which company has a superior business model. //However, be careful//: a direct comparison is only useful for very similar businesses. A trucking company specializing in refrigerated food will naturally have a much higher RPTM than one that hauls sand.
==== Tracking a Single Company Over Time ====
The most powerful use of RPTM is to track it for a single company over five to ten years. This historical trend is far more revealing than a single snapshot.
  * **A consistent upward trend** is a strong indicator of a durable competitive advantage and a well-managed business.
  * **A flat or declining trend** can be a major red flag. It may signal intense price competition, a forced shift into less profitable cargo, or an inability to pass on inflationary costs to customers. It's a clear signal to dig deeper into the company's competitive standing.