Stock Analysis

Will Daseke's (NASDAQ:DSKE) Growth In ROCE Persist?

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NasdaqCM:DSKE
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Did you know there are some financial metrics that can provide clues of a potential 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. 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 on that note, Daseke (NASDAQ:DSKE) looks quite promising in regards to its trends of return on capital.

Return On Capital Employed (ROCE): What is it?

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. To calculate this metric for Daseke, this is the formula:

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

0.057 = US$54m ÷ (US$1.2b - US$239m) (Based on the trailing twelve months to September 2020).

So, Daseke has an ROCE of 5.7%. Ultimately, that's a low return and it under-performs the Transportation industry average of 10%.

View our latest analysis for Daseke

roce
NasdaqCM:DSKE Return on Capital Employed November 28th 2020

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'd like to see what analysts are forecasting going forward, you should check out our free report for Daseke.

What Does the ROCE Trend For Daseke Tell Us?

While in absolute terms it isn't a high ROCE, it's promising to see that it has been moving in the right direction. The data shows that returns on capital have increased substantially over the last four years to 5.7%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 83%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

Our Take On Daseke's ROCE

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Daseke has. Astute investors may have an opportunity here because the stock has declined 45% in the last three years. So researching this company further and determining whether or not these trends will continue seems justified.

On a final note, we've found 1 warning sign for Daseke that we think you should be aware of.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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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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