J.B. Hunt Transport Services (NASDAQ:JBHT) Is Reinvesting To Multiply In Value

There are a few key trends to look for if we want to identify the next multi-bagger. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. That's why when we briefly looked at J.B. Hunt Transport Services' (NASDAQ:JBHT) ROCE trend, we were very happy with what we saw.

Return On Capital Employed (ROCE): What Is It?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on J.B. Hunt Transport Services is:

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

0.24 = US$1.3b ÷ (US$7.3b - US$1.9b) (Based on the trailing twelve months to June 2022).

So, J.B. Hunt Transport Services has an ROCE of 24%. In absolute terms that's a great return and it's even better than the Transportation industry average of 15%.

View our latest analysis for J.B. Hunt Transport Services

Above you can see how the current ROCE for J.B. Hunt Transport Services 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 J.B. Hunt Transport Services.

What The Trend Of ROCE Can Tell Us

J.B. Hunt Transport Services deserves to be commended in regards to it's returns. Over the past five years, ROCE has remained relatively flat at around 24% and the business has deployed 70% more capital into its operations. Returns like this are the envy of most businesses and given it has repeatedly reinvested at these rates, that's even better. If J.B. Hunt Transport Services can keep this up, we'd be very optimistic about its future.

Our Take On J.B. Hunt Transport Services' ROCE

In the end, the company has proven it can reinvest it's capital at high rates of returns, which you'll remember is a trait of a multi-bagger. And the stock has followed suit returning a meaningful 78% to shareholders over the last five years. So while the positive underlying trends may be accounted for by investors, we still think this stock is worth looking into further.

If you want to know some of the risks facing J.B. Hunt Transport Services we've found 2 warning signs (1 can't be ignored!) that you should be aware of before investing here.

High returns are a key ingredient to strong performance, so check out our free list ofstocks earning high returns on equity with solid balance sheets.

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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.