Show pageOld revisionsBacklinksBack to top This page is read only. You can view the source, but not change it. Ask your administrator if you think this is wrong. ======Ton-Mile====== A ton-mile is a fundamental unit of measurement in the freight transport industry that represents the movement of one ton of freight over a distance of one mile. Think of it as the basic "unit of work" for a railroad or trucking company. If a train hauls 50 tons of coal for 100 miles, it has generated 5,000 ton-miles (50 tons x 100 miles). This metric is far more insightful than simply counting tons carried or miles traveled alone. For instance, a company moving 1,000 tons for just 1 mile (1,000 ton-miles) is doing significantly less business than a company moving 20 tons for 100 miles (2,000 ton-miles), even though the first company moved more weight. It's the standard yardstick for measuring traffic volume and operational output in the [[Railroad industry]], [[Trucking industry]], and [[Shipping industry]]. ===== Why Ton-Miles Matter to Investors ===== For an investor, the ton-mile is more than just industry jargon; it's a powerful lens for viewing a transportation company's health and the vitality of the broader economy. Simply looking at a company's fleet size or even its total [[Revenue]] can be misleading. A fleet of trucks could be running half-empty, and revenue could be boosted by temporary fuel surcharges. Ton-miles, however, cut through the noise to show the //actual physical volume// of goods being moved. Tracking ton-mile data over time reveals crucial trends. * **Company Performance:** A steady increase in a company's ton-miles suggests it is capturing more business and growing its market share. A decline could be an early warning sign of operational issues or losing ground to competitors. * **Economic Indicator:** Because transportation is the lifeblood of commerce, aggregate ton-mile figures for an entire industry serve as a reliable [[economic indicator]]. When businesses are confident and producing more, they ship more goods, and total ton-miles rise. Conversely, a sustained drop in ton-miles can signal a looming economic slowdown. ===== Putting Ton-Miles into a Value Investing Context ===== Value investors love metrics that reveal the underlying reality of a business, and the ton-mile is a perfect example. It allows for a deeper analysis of profitability and efficiency, which are central to identifying a durable, high-quality business. ==== Analyzing Operating Efficiency ==== By combining ton-miles with financial data, we can calculate key performance indicators that are invaluable for comparing companies. - **Revenue per Ton-Mile (RTM):** This is calculated as Total Freight Revenue / Total Ton-Miles. RTM tells you how much the company earns for moving one ton of freight one mile. A company with a consistently higher RTM than its peers may have stronger [[pricing power]], often a sign of a [[competitive advantage]] or "[[moat]]." It might be transporting higher-value goods or have a more dominant position in its network. - **Cost per Ton-Mile:** This metric helps assess [[operating efficiency]]. A company that systematically lowers its cost per ton-mile is becoming a more effective operator. This could be achieved through fuel-efficient locomotives, longer trains, better logistics, or a favorable mix of [[fixed costs]] and [[variable costs]]. Comparing this figure between, say, [[Union Pacific]] and [[CSX Corporation]], can reveal which is the leaner, more profitable machine. ==== A Lesson from Warren Buffett ==== When [[Warren Buffett]]'s [[Berkshire Hathaway]] acquired the railroad [[Burlington Northern Santa Fe]] (BNSF), he wasn't just buying trains and track. He was buying a slice of the American economic engine. Buffett and his team meticulously analyze operational data, and ton-miles are at the heart of that analysis. They understand that the long-term value of BNSF is directly tied to the volume of essential goods—from grain and coal to consumer products—that it transports across the country. Ton-miles provide a clear, quantifiable measure of this fundamental activity, helping an investor like Buffett see the long-term value proposition and ignore short-term market noise. ===== Practical Takeaways ===== For the savvy investor, understanding ton-miles provides a significant edge when evaluating transportation stocks. * **Go Beyond the Surface:** Don't just look at revenue and profit. Dig into a company's quarterly and annual reports to find its ton-mile data. * **Watch the Trend:** Is the company's core workload (its ton-miles) growing, stagnating, or shrinking over time? * **Compare with Peers:** Use metrics like Revenue per Ton-Mile to identify companies with pricing power and a strong competitive position. * **Think Macro:** Keep an eye on industry-wide ton-mile reports to get a feel for the direction of the overall economy.