Shengfeng Development (NASDAQ:SFWL) Is Doing The Right Things To Multiply Its Share Price

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing 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, Shengfeng Development (NASDAQ:SFWL) looks quite promising in regards to its trends of return on capital.

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What Is Return On Capital Employed (ROCE)?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. To calculate this metric for Shengfeng Development, this is the formula:

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

0.10 = US$16m ÷ (US$296m - US$144m) (Based on the trailing twelve months to June 2025).

So, Shengfeng Development has an ROCE of 10%. That's a relatively normal return on capital, and it's around the 12% generated by the Logistics industry.

View our latest analysis for Shengfeng Development

Historical performance is a great place to start when researching a stock so above you can see the gauge for Shengfeng Development's ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Shengfeng Development.

So How Is Shengfeng Development's ROCE Trending?

The trends we've noticed at Shengfeng Development are quite reassuring. The data shows that returns on capital have increased substantially over the last five years to 10%. The amount of capital employed has increased too, by 58%. So we're very much inspired by what we're seeing at Shengfeng Development thanks to its ability to profitably reinvest capital.

Another thing to note, Shengfeng Development has a high ratio of current liabilities to total assets of 49%. This can bring about some risks because the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. While it's not necessarily a bad thing, it can be beneficial if this ratio is lower.

Our Take On Shengfeng Development's ROCE

All in all, it's terrific to see that Shengfeng Development is reaping the rewards from prior investments and is growing its capital base. Astute investors may have an opportunity here because the stock has declined 33% in the last year. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 2 warning signs for Shengfeng Development (of which 1 shouldn't be ignored!) that you should know about.

While Shengfeng Development 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.