Saia (NASDAQ:SAIA) Might Have The Makings Of A Multi-Bagger

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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. With that in mind, we've noticed some promising trends at Saia (NASDAQ:SAIA) so let's look a bit deeper.

What Is 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 Saia:

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

0.19 = US$498m ÷ (US$3.0b - US$328m) (Based on the trailing twelve months to June 2024).

So, Saia has an ROCE of 19%. On its own, that's a standard return, however it's much better than the 7.7% generated by the Transportation industry.

See our latest analysis for Saia

Above you can see how the current ROCE for Saia 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 analyst report for Saia .

What The Trend Of ROCE Can Tell Us

The trends we've noticed at Saia are quite reassuring. Over the last five years, returns on capital employed have risen substantially to 19%. The amount of capital employed has increased too, by 136%. So we're very much inspired by what we're seeing at Saia thanks to its ability to profitably reinvest capital.

What We Can Learn From Saia's ROCE

In summary, it's great to see that Saia can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. 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.

On a separate note, we've found 1 warning sign for Saia you'll probably want to know about.

While Saia 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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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.