Stock Analysis

Has U.S. Xpress Enterprises (NYSE:USX) Got What It Takes To Become A Multi-Bagger?

  •  Updated
NYSE:USX
Source: Shutterstock

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing 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. However, after briefly looking over the numbers, we don't think U.S. Xpress Enterprises (NYSE:USX) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

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. The formula for this calculation on U.S. Xpress Enterprises is:

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

0.035 = US$30m ÷ (US$1.2b - US$354m) (Based on the trailing twelve months to September 2020).

So, U.S. Xpress Enterprises has an ROCE of 3.6%. Ultimately, that's a low return and it under-performs the Transportation industry average of 9.8%.

View our latest analysis for U.S. Xpress Enterprises

roce
NYSE:USX Return on Capital Employed January 19th 2021

Above you can see how the current ROCE for U.S. Xpress Enterprises 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 report on analyst forecasts for the company.

The Trend Of ROCE

On the surface, the trend of ROCE at U.S. Xpress Enterprises doesn't inspire confidence. Over the last three years, returns on capital have decreased to 3.6% from 5.7% three years ago. 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's worth keeping an eye on the company's earnings from here on to see if these investments do end up contributing to the bottom line.

In Conclusion...

In summary, U.S. Xpress Enterprises is reinvesting funds back into the business for growth but unfortunately it looks like sales haven't increased much just yet. Although the market must be expecting these trends to improve because the stock has gained 19% over the last year. However, unless these underlying trends turn more positive, we wouldn't get our hopes up too high.

If you want to know some of the risks facing U.S. Xpress Enterprises we've found 4 warning signs (1 is potentially serious!) that you should be aware of before investing here.

While U.S. Xpress Enterprises may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

If you’re looking to trade U.S. Xpress Enterprises, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted


Valuation is complex, but we're helping make it simple.

Find out whether U.S. Xpress Enterprises is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis