Back the truck up for shares of this commercial vehicle maker. Supreme Industries is reaping the benefits from investments in production facilities and a spunky new sales team. Quick turnaround times for custom-designed box trucks and increased selling to national customers are driving revenue and profits up.

Earnings grew more than 50% in 2015, partly due to favorable comparisons with 2014, when a disruption in parts availability crunched profits. Investors suspected the growth would be more sustainable when the company announced a doubling of earnings for the first quarter of 2016 late last month.

Strong growth in small commercial trucks (classes 3–7) and an increase in demand for more profitable retail trucks from national customers should propel earnings 25% higher this year.

Despite the stock skyrocketing 80% year to date, our target of $23 is 70% higher than current prices.

Smaller Is Better

One of the long-term trends benefiting Supreme (NYSE: STS) is an industry shift to smaller trucks. Commercial trucks are categorized in size from class 1–12. Supreme specializes in only class 3–7 trucks. A class 3 truck is similar in size to a FedEx delivery truck, and a class 7 can be as large as a garbage truck.

Several forces are driving demand for these smaller truck bodies. An explosion in home delivery from e-commerce retailers, a shift in outsourcing delivery logistics to national leasing companies, and onerous regulations for large class 8 truck operators create fertile ground for Supreme (see “Trucking for Profits” on page 5).

The first trend should come as no surprise to anyone who has ever arrived home to a stack of Amazon boxes on the front porch. The e-commerce industry has more than doubled in the past five years and shows no sign of stopping. Amazon recently announced the number of consumers subscribing to its free delivery Prime membership program grew 51% in 2015.

Same-day delivery, which Amazon now offers in 27 metro cities, requires nimble trucks. Not only are smaller class 3–7 trucks able to navigate small city streets better, their compact truck boxes allow for speedy retrieval and delivery of small packages.

We’ve been following the Amazon delivery trend closely and recently recommended a stock at Investing Daily’s sister publication, Profit Catalyst, that should also benefit from Amazon’s desire to control each leg of the delivery channel.

Nationwide Footprint

Supreme also benefits from being one of the few truck box makers with a national footprint. Many retailers such as Best Buy and Krispy Kreme Donuts outsource their delivery logistics to leasing companies such as Penske and Ryder.

Operating six manufacturing facilities and five regional sales teams nationally gives Supreme an advantage on regional suppliers. Large companies such as Penske and Ryder prefer to work with one large supplier instead of many smaller companies.

Higher demand for customized truck bodies from retailers is boosting Supreme’s profit margins. Unlike the bare-bones truck bodies you see when renting a moving truck from Ryder, these bodies come with all sorts of bells and whistles that drive up the price and the profit.

Fiberglass sidewalls, stand-up-height cabs and wall vents are just some of the options that customers can include in their truck bodies. These options increase fuel efficiency, improve driver comfort and increase profitability for Supreme.

This shift to more profitable orders boosted product margins to almost 22% in the last six months, up from 18%. Management notes that a higher portion of its backlog is tied to these more profitable customized trucks.

In addition, Supreme is the go-to shop for quick turnaround times. Its ability to secure engine parts and its six regional, vertically integrated manufacturing facilities get smaller trucks to customers in time for their busy seasons. An unexpected delay in a truck’s delivery can wreak havoc on a retailer’s most profitable sales periods.

Profits in the Fast Lane

Supreme initiated a corporate restructuring in 2011 that involved hiring a new CFO, reconfiguring its sales force into regional teams and administering pricing discipline to sales. Since then revenue is up 10%, but profits have more than quadrupled.

After a 52% explosion in earnings in 2015, Supreme is shifting into a lower but immensely profitable gear. Revenue growth of 10% in the company’s first quarter drove a doubling of earnings. Expectations for a 25% jump in earnings to 95 cents per share in 2016 and another 19% to $1.13 in 2017 should keep this stock in the fast lane for the foreseeable future.

Buy up to $23.