Slowing Rates Of Return At U-Haul Holding (NYSE:UHAL) Leave Little Room For Excitement

What trends should we look for it we want to identify stocks that can multiply in value over the long term? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. However, after investigating U-Haul Holding (NYSE:UHAL), we don't think it's current trends fit the mold of a multi-bagger.

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. To calculate this metric for U-Haul Holding, this is the formula:

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

0.056 = US$984m ÷ (US$19b - US$1.3b) (Based on the trailing twelve months to March 2024).

Thus, U-Haul Holding has an ROCE of 5.6%. Ultimately, that's a low return and it under-performs the Transportation industry average of 7.0%.

View our latest analysis for U-Haul Holding

Above you can see how the current ROCE for U-Haul Holding compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering U-Haul Holding for free.

What Can We Tell From U-Haul Holding's ROCE Trend?

In terms of U-Haul Holding's historical ROCE trend, it doesn't exactly demand attention. The company has consistently earned 5.6% for the last five years, and the capital employed within the business has risen 56% in that time. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.

The Key Takeaway

In conclusion, U-Haul Holding has been investing more capital into the business, but returns on that capital haven't increased. Since the stock has gained an impressive 86% over the last five years, investors must think there's better things to come. However, unless these underlying trends turn more positive, we wouldn't get our hopes up too high.

One more thing to note, we've identified 1 warning sign with U-Haul Holding and understanding it should be part of your investment process.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com