JBHT data by YCharts.

JB Hunt Transport Services (NASDAQ:JBHT) stock put the pedal to the metal this week, roaring ahead more than 3% on a down day for the S&P 500 Wednesday. For this feat, you can credit an earnings beat.

Reporting earnings for Q3 2015, JB Hunt announced:

  • $1.59 billion in quarterly sales, down 1% year over year despite increasing some rates and putting more trucks on the road, thanks to less cash being collected from "fuel surcharges."
  • On the plus side, the same lower fuel costs that rolled back those surcharges helped JB cut costs. Total operating costs declined by more than 2%, with the result that despite lower revenues, operating margins surged by 150 basis points, and operating profits were up nearly 13%.
  • As a result, even though costs for income tax and interest on debt increased, the company managed to hold on to 90 basis points' worth of improvement in net profit margins (7.3% for the quarter), and grow profits to $0.99 per diluted share -- a 14% improvement and $0.02 ahead of analyst estimates.

That improved profit margin puts JB Hunt at the top of its game for this year. So far, the first nine months of 2015 have seen JB Hunt average a 6.8% net profit margin on its business. That's up one full percentage point over margins earned in the first three quarters of 2014 -- and thanks to Q3's performance, apparently still climbing.

This year's improvement in profit margins has allowed JB Hunt to transform a nearly flat year for overall revenue growth into powerfully improved profits. Year to date, profits of $2.65 per diluted share are looking 19% better than what JB recorded in the first three quarters of 2014.

Perhaps best of all, whereas JB Hunt struggled to produce positive free cash flow from its business last year (generating just $7.1 million in free cash flow in its first three quarters), this year the company has already generated positive FCF of $266.3 million.

Valuation
So, what does all this mean to investors wondering whether to buy JB Hunt stock today? Let's consider. So far this year, JB has reported $310.5 million in net profit. At the current run rate, that implies full-year profits of perhaps $414 million. And on JB's $8.7 billion market cap, that works out to a current-year P/E ratio of about 21 for the stock.

That's not a half-bad valuation for a stock that's grown earnings 19% year over year. On the other hand, analysts who follow JB still expect to see earnings growth slow down to about 15% annualized over the next five years. If they're right about that, 21 times earnings might be a bit much to pay for the stock.

Furthermore, if you value JB on its cash profits, well, $266.3 million free cash flow is certainly a big improvement over the $7.1 million JB had banked by this time last year. Still, it works out to only about a $355 million annual run rate on FCF -- and a price-to-free cash flow ratio of 24.5. Once again, this seems a pretty pricey valuation for 15% long-term profits growth. In fact, it might be a bit much to pay even if JB maintains the 19% GAAP profits growth rate we've seen it produce so far this year.

Long story short, while Q3 was a very nice quarter for JB Hunt, and a continuation of a pretty healthy year for the company, the stock's valuation seems to incorporate all the good news this trucker has delivered in 2015 -- and more. If it's a bargain you're seeking to invest in, JB Hunt probably isn't the right stock for you.

Luckily, with earnings season now in full swing, we'll have ample opportunities to search elsewhere for better bargains. Stay tuned.

Rich Smith does not own shares of, nor is he short, any company named above. You can find him on Motley Fool CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 305 out of more than 75,000 rated members.

The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.