Expeditors International of Washington (NASDAQ:EXPD) Is Aiming To Keep Up Its Impressive Returns

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Ergo, when we looked at the ROCE trends at Expeditors International of Washington (NASDAQ:EXPD), we liked what we saw.

What Is 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 Expeditors International of Washington:

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

0.45 = US$1.4b ÷ (US$4.6b - US$1.6b) (Based on the trailing twelve months to June 2023).

So, Expeditors International of Washington has an ROCE of 45%. That's a fantastic return and not only that, it outpaces the average of 15% earned by companies in a similar industry.

See our latest analysis for Expeditors International of Washington

In the above chart we have measured Expeditors International of Washington's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Expeditors International of Washington.

The Trend Of ROCE

In terms of Expeditors International of Washington's history of ROCE, it's quite impressive. Over the past five years, ROCE has remained relatively flat at around 45% and the business has deployed 58% more capital into its operations. With returns that high, it's great that the business can continually reinvest its money at such appealing rates of return. If Expeditors International of Washington can keep this up, we'd be very optimistic about its future.

The Bottom Line

In short, we'd argue Expeditors International of Washington has the makings of a multi-bagger since its been able to compound its capital at very profitable rates of return. And since the stock has risen strongly over the last five years, it appears the market might expect this trend to continue. So while the positive underlying trends may be accounted for by investors, we still think this stock is worth looking into further.

If you'd like to know about the risks facing Expeditors International of Washington, we've discovered 1 warning sign that you should be aware of.

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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.