Knight-Swift Transportation Holdings (NYSE:KNX) Will Want To Turn Around Its Return Trends

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount 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. However, after investigating Knight-Swift Transportation Holdings (NYSE:KNX), we don't think it's current trends fit the mold of a multi-bagger.

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Understanding 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. Analysts use this formula to calculate it for Knight-Swift Transportation Holdings:

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

0.024 = US$259m ÷ (US$13b - US$1.6b) (Based on the trailing twelve months to March 2025).

Thus, Knight-Swift Transportation Holdings has an ROCE of 2.4%. In absolute terms, that's a low return and it also under-performs the Transportation industry average of 9.1%.

Check out our latest analysis for Knight-Swift Transportation Holdings

Above you can see how the current ROCE for Knight-Swift Transportation Holdings 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 Knight-Swift Transportation Holdings .

What Does the ROCE Trend For Knight-Swift Transportation Holdings Tell Us?

On the surface, the trend of ROCE at Knight-Swift Transportation Holdings doesn't inspire confidence. Around five years ago the returns on capital were 5.9%, but since then they've fallen to 2.4%. On the other hand, the company has been employing more capital without a corresponding improvement in sales in the last year, which could suggest these investments are longer term plays. It may take some time before the company starts to see any change in earnings from these investments.

The Bottom Line On Knight-Swift Transportation Holdings' ROCE

To conclude, we've found that Knight-Swift Transportation Holdings is reinvesting in the business, but returns have been falling. Unsurprisingly, the stock has only gained 13% over the last five years, which potentially indicates that investors are accounting for this going forward. Therefore, if you're looking for a multi-bagger, we'd propose looking at other options.

On a separate note, we've found 1 warning sign for Knight-Swift Transportation Holdings you'll probably want to know about.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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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.