Investors Shouldn't Overlook Old Dominion Freight Line's (NASDAQ:ODFL) Impressive Returns On Capital

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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. With that in mind, the ROCE of Old Dominion Freight Line (NASDAQ:ODFL) looks great, so lets see what the trend can tell us.

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. Analysts use this formula to calculate it for Old Dominion Freight Line:

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

0.41 = US$1.8b ÷ (US$5.0b - US$570m) (Based on the trailing twelve months to March 2023).

Thus, Old Dominion Freight Line has an ROCE of 41%. In absolute terms that's a great return and it's even better than the Transportation industry average of 14%.

Check out our latest analysis for Old Dominion Freight Line

Above you can see how the current ROCE for Old Dominion Freight Line 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 Old Dominion Freight Line.

SWOT Analysis for Old Dominion Freight Line

So How Is Old Dominion Freight Line's ROCE Trending?

The trends we've noticed at Old Dominion Freight Line are quite reassuring. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 41%. The amount of capital employed has increased too, by 57%. So we're very much inspired by what we're seeing at Old Dominion Freight Line thanks to its ability to profitably reinvest capital.

The Bottom Line On Old Dominion Freight Line'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 Old Dominion Freight Line has. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

While Old Dominion Freight Line looks impressive, no company is worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether ODFL is currently trading for a fair price.

Old Dominion Freight Line is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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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.