Stock Analysis

Returns On Capital Are Showing Encouraging Signs At Daseke (NASDAQ:DSKE)

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NasdaqCM:DSKE
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What are the early trends we should look for to identify a stock that could multiply in value over the long term? 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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So when we looked at Daseke (NASDAQ:DSKE) and its trend of ROCE, we really liked what we saw.

Understanding Return On Capital Employed (ROCE)

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for Daseke:

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

0.065 = US$54m ÷ (US$1.0b - US$209m) (Based on the trailing twelve months to March 2021).

So, Daseke has an ROCE of 6.5%. In absolute terms, that's a low return and it also under-performs the Transportation industry average of 11%.

Check out our latest analysis for Daseke

roce
NasdaqCM:DSKE Return on Capital Employed August 4th 2021

Above you can see how the current ROCE for Daseke compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

The Trend Of ROCE

Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. The data shows that returns on capital have increased substantially over the last five years to 6.5%. The amount of capital employed has increased too, by 62%. So we're very much inspired by what we're seeing at Daseke thanks to its ability to profitably reinvest capital.

The Bottom Line On Daseke's ROCE

To sum it up, Daseke has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Since the total return from the stock has been almost flat over the last three years, there might be an opportunity here if the valuation looks good. With that in mind, we believe the promising trends warrant this stock for further investigation.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 3 warning signs for Daseke (of which 1 is potentially serious!) that you should know about.

While Daseke isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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What are the risks and opportunities for Daseke?

Daseke, Inc. provides transportation and logistics solutions with a focus on flatbed and specialized freight in the United States, Canada, and Mexico.

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Rewards

  • Price-To-Earnings ratio (6.7x) is below the US market (15x)

  • Earnings are forecast to grow 7.16% per year

Risks

  • Has a high level of debt

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