Stock Analysis

Returns At U.S. Xpress Enterprises (NYSE:USX) Appear To Be Weighed Down

  •  Updated
NYSE:USX
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What are the early trends we should look for to identify a stock that could multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Although, when we looked at U.S. Xpress Enterprises (NYSE:USX), it didn't seem to tick all of these boxes.

What is Return On Capital Employed (ROCE)?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its 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)

0.068 = US$55m ÷ (US$1.2b - US$366m) (Based on the trailing twelve months to March 2021).

So, U.S. Xpress Enterprises has an ROCE of 6.8%. In absolute terms, that's a low return and it also under-performs the Transportation industry average of 9.9%.

View our latest analysis for U.S. Xpress Enterprises

roce
NYSE:USX Return on Capital Employed June 18th 2021

In the above chart we have measured U.S. Xpress Enterprises' prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

What Can We Tell From U.S. Xpress Enterprises' ROCE Trend?

There are better returns on capital out there than what we're seeing at U.S. Xpress Enterprises. Over the past four years, ROCE has remained relatively flat at around 6.8% and the business has deployed 77% more capital into its operations. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

The Key Takeaway

In conclusion, U.S. Xpress Enterprises has been investing more capital into the business, but returns on that capital haven't increased. And in the last three years, the stock has given away 42% so the market doesn't look too hopeful on these trends strengthening any time soon. In any case, the stock doesn't have these traits of a multi-bagger discussed above, so if that's what you're looking for, we think you'd have more luck elsewhere.

On a final note, we've found 1 warning sign for U.S. Xpress Enterprises that we think you should be aware of.

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.

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