Yahoo Finance J.B. Hunt Transport Services (NASDAQ:JBHT) Is Achieving High Returns On Its Capital
To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. And in light of that, the trends we're seeing at J.B. Hunt Transport Services' (NASDAQ:JBHT) look very promising so lets take a look.
Return On Capital Employed (ROCE): What Is It?
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. Analysts use this formula to calculate it for J.B. Hunt Transport Services:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.22 = US$1.3b ÷ (US$7.7b - US$1.6b) (Based on the trailing twelve months to December 2022).
So, J.B. Hunt Transport Services has an ROCE of 22%. In absolute terms that's a great return and it's even better than the Transportation industry average of 14%.
View our latest analysis for J.B. Hunt Transport Services
In the above chart we have measured J.B. Hunt Transport Services' 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 Does the ROCE Trend For J.B. Hunt Transport Services Tell Us?
We like the trends that we're seeing from J.B. Hunt Transport Services. Over the last five years, returns on capital employed have risen substantially to 22%. The amount of capital employed has increased too, by 74%. So we're very much inspired by what we're seeing at J.B. Hunt Transport Services thanks to its ability to profitably reinvest capital.
In Conclusion...
To sum it up, J.B. Hunt Transport Services has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Since the stock has returned a solid 69% to shareholders over the last five years, it's fair to say investors are beginning to recognize these changes. In light of that, we think it's worth looking further into this stock because if J.B. Hunt Transport Services can keep these trends up, it could have a bright future ahead.
On a final note, we've found 1 warning sign for J.B. Hunt Transport Services that we think you should be aware of.
High returns are a key ingredient to strong performance, so check out our free list ofstocks earning high returns on equity with solid balance sheets.
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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.
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