Finding businesses that could effectively grow is not easy, but looking at some key financial metrics is possible. Ideally, business shows two trends. First, the return on capital (ROCE) employed, and secondly, the increase in capital employed. Simply put, these types of businesses mix machines. In other words, the rate of return is constantly reinvesting revenues at the rate of return. With that in mind, Old Dominion Cargo Line (NASDAQ:ODFL) loin looks good, so let’s take a look at what the trend can convey.
If you have never worked with Roce before, measure the “pre-tax profit” (pre-tax profit) that the company generates from the capital employed in the business. The equation for this calculation for the old Dominion cargo line is:
Return on Employed Capital = Interest and Earnings Before Tax (EBIT) ÷ (Total Assets – Current Liabilities)
0.31 = US$150 million ÷ (US$5.5 billion – US$541 million) (based on the 12 months to December 2024).
Therefore, the loin on the old Dominion cargo line is 31%. In absolute terms, it is a big return, even better than the average 7.7% in the transportation industry.
Check out the latest analysis of the Old Dominion Cargo Line
In the chart above, we measured the previous Roce of the older Dominion cargo line against previous performance, but the future is undoubtedly more important. If necessary, you can view free predictions from analysts covering your old Dominion freight lines.
We like the trends seen from the old Dominion freight lines. The figures show that over the past five years, returns generated with capital adopted have increased significantly to 31%. It is worth noting that the company effectively earns more money than per dollar of capital used, and its amount of capital has also increased by 36%. This indicates that there are many opportunities to invest capital internally and at higher rates. This is a common combination among multibuggers.
In summary, it’s great to see that the old Dominion freight lines can complicate returns by consistently reinvesting capital into increased rates of return. And these patterns have been explained by investors because stocks have been working so well over the past five years. Therefore, given that stocks prove to be promising trends, it is worth exploring the company further to see if these trends could last.
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