Why Landstar System’s 43% Return on Capital (NASDAQ: LSTR) Should Get Your Attention


Did you know that certain financial measures can provide clues about a potential multi-bagger? First, we would like to identify a growth to recover on capital employed (ROCE) and at the same time, a based capital employed. Ultimately, this demonstrates that this is a company that is reinvesting its profits at increasing rates of return. Speaking of which, we have noticed some big changes in Landstar System (NASDAQ: LSTR) capital returns, so let’s take a look.

Return on capital employed (ROCE): what is it?

If you’ve never worked with ROCE before, it measures the “return” (profit before tax) that a business generates on capital employed in its business. The formula for this calculation on Landstar System is:

Return on capital employed = Profit before interest and taxes (EBIT) ÷ (Total assets – Current liabilities)

0.43 = $ 454 million ÷ ($ 1.9 billion – $ 847 million) (Based on the last twelve months up to September 2021).

So, Landstar System has a ROCE of 43%. In absolute terms, this is an excellent return and is even better than the transportation industry average of 12%.

NasdaqGS: LSTR Return on Capital Employed October 24, 2021

In the graph above, we measured Landstar System’s past ROCE against its past performance, but the future is arguably more important. If you are interested, you can view analyst forecasts in our free business analyst forecast report.

What can we say about Landstar System’s ROCE trend?

The trends we have seen at Landstar System are rather reassuring. Over the past five years, returns on capital employed have increased substantially to 43%. Basically the business earns more per dollar of capital invested and on top of that 57% more capital is also being used now. Increasing returns on an increasing amount of capital are common among multi-baggers and that is why we are impressed.

By the way, we’ve noticed that the improvement in ROCE appears to be partly fueled by an increase in current liabilities. In effect, this means that suppliers or short-term creditors now finance 44% of the business, more than five years ago. And with current liabilities at these levels, it’s pretty high.

Landstar System ROCE result

A business that increases its returns on capital and can constantly reinvest in itself is a highly desirable trait, and that’s what Landstar System has. And a remarkable 167% total return over the past five years tells us that investors expect more good things to come in the future. In light of this, we think it’s worth exploring this title further because if Landstar System can maintain these trends, it could have a bright future ahead of it.

One more thing, we spotted 1 warning sign facing the Landstar system that you might find interesting.

If you want to look for other stocks that have generated high returns, check out this free list of stocks with strong balance sheets that also generate high returns on equity.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in the mentioned stocks.

Do you have any feedback on this item? Are you worried about the content? Get in touch with us directly. You can also send an email to the editorial team (at) simplywallst.com.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Source link

Leave A Reply

Your email address will not be published.