Why We Like The Returns At Old Dominion Freight Line (NASDAQ:ODFL)

editorial-team@simplywallst.com (Simply Wall St)
2 min read
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Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at the ROCE trend of Old Dominion Freight Line (NASDAQ:ODFL) we really liked what we saw.

Understanding Return On Capital Employed (ROCE)

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for Old Dominion Freight Line:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.33 = US$1.6b ÷ (US$5.5b - US$545m) (Based on the trailing twelve months to December 2023).

Thus, Old Dominion Freight Line has an ROCE of 33%. In absolute terms that's a great return and it's even better than the Transportation industry average of 8.1%.

See our latest analysis for Old Dominion Freight Line

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Above you can see how the current ROCE for Old Dominion Freight Line compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Old Dominion Freight Line .

So How Is Old Dominion Freight Line's ROCE Trending?

Old Dominion Freight Line is displaying some positive trends. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 33%. The amount of capital employed has increased too, by 56%. So we're very much inspired by what we're seeing at Old Dominion Freight Line thanks to its ability to profitably reinvest capital.

In Conclusion...

All in all, it's terrific to see that Old Dominion Freight Line is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a staggering 351% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if Old Dominion Freight Line can keep these trends up, it could have a bright future ahead.

If you'd like to know about the risks facing Old Dominion Freight Line, we've discovered 1 warning sign that you should be aware of.

Old Dominion Freight Line is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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