We Think Kuehne + Nagel International (VTX:KNIN) Might Have The DNA Of A Multi-Bagger

There are a few key trends to look for if we want to identify the next multi-bagger. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Speaking of which, we noticed some great changes in Kuehne + Nagel International's (VTX:KNIN) returns on capital, so let's have a look.

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. The formula for this calculation on Kuehne + Nagel International is:

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

0.31 = CHF1.5b ÷ (CHF11b - CHF6.4b) (Based on the trailing twelve months to September 2024).

So, Kuehne + Nagel International has an ROCE of 31%. That's a fantastic return and not only that, it outpaces the average of 8.7% earned by companies in a similar industry.

See our latest analysis for Kuehne + Nagel International

In the above chart we have measured Kuehne + Nagel International's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for Kuehne + Nagel International .

What The Trend Of ROCE Can Tell Us

Kuehne + Nagel International has not disappointed with their ROCE growth. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 41% over the last five years. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

On a side note, Kuehne + Nagel International's current liabilities are still rather high at 57% of total assets. This effectively means that suppliers (or short-term creditors) are funding a large portion of the business, so just be aware that this can introduce some elements of risk. Ideally we'd like to see this reduce as that would mean fewer obligations bearing risks.

The Bottom Line On Kuehne + Nagel International's ROCE

To sum it up, Kuehne + Nagel International is collecting higher returns from the same amount of capital, and that's impressive. And with a respectable 50% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. In light of that, we think it's worth looking further into this stock because if Kuehne + Nagel International can keep these trends up, it could have a bright future ahead.

Kuehne + Nagel International does have some risks though, and we've spotted 1 warning sign for Kuehne + Nagel International that you might be interested in.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets here.

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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.