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To find a multi-bagger stock, what are the underlying trends we should look for in a business? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing 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 Schneider National (NYSE:SNDR), it didn't seem to tick all of these boxes.
Understanding 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. To calculate this metric for Schneider National, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.04 = US$167m ÷ (US$4.9b - US$705m) (Based on the trailing twelve months to December 2024).
Therefore, Schneider National has an ROCE of 4.0%. Ultimately, that's a low return and it under-performs the Transportation industry average of 7.7%.
See our latest analysis for Schneider National
Above you can see how the current ROCE for Schneider National 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 analyst report for Schneider National .
How Are Returns Trending?
On the surface, the trend of ROCE at Schneider National doesn't inspire confidence. Around five years ago the returns on capital were 11%, but since then they've fallen to 4.0%. 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.
Our Take On Schneider National's ROCE
Bringing it all together, while we're somewhat encouraged by Schneider National's reinvestment in its own business, we're aware that returns are shrinking. Since the stock has gained an impressive 72% over the last five years, investors must think there's better things to come. Ultimately, if the underlying trends persist, we wouldn't hold our breath on it being a multi-bagger going forward.
If you'd like to know about the risks facing Schneider National, we've discovered 1 warning sign that you should be aware of.