Yahoo Finance Expeditors International of Washington (NYSE:EXPD) Is Aiming To Keep Up Its Impressive Returns
Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Ergo, when we looked at the ROCE trends at Expeditors International of Washington (NYSE:EXPD), we liked what we saw.
Understanding Return On Capital Employed (ROCE)
If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Expeditors International of Washington, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.33 = US$940m ÷ (US$4.5b - US$1.7b) (Based on the trailing twelve months to December 2023).
Thus, Expeditors International of Washington has an ROCE of 33%. In absolute terms that's a great return and it's even better than the Logistics industry average of 9.3%.
Check out our latest analysis for Expeditors International of Washington
Above you can see how the current ROCE for Expeditors International of Washington compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Expeditors International of Washington for free.
How Are Returns Trending?
In terms of Expeditors International of Washington's history of ROCE, it's quite impressive. The company has employed 42% more capital in the last five years, and the returns on that capital have remained stable at 33%. With returns that high, it's great that the business can continually reinvest its money at such appealing rates of return. If Expeditors International of Washington can keep this up, we'd be very optimistic about its future.
The Key Takeaway
Expeditors International of Washington has demonstrated its proficiency by generating high returns on increasing amounts of capital employed, which we're thrilled about. And the stock has followed suit returning a meaningful 73% to shareholders over the last five years. So even though the stock might be more "expensive" than it was before, we think the strong fundamentals warrant this stock for further research.
One more thing to note, we've identified 1 warning sign with Expeditors International of Washington and understanding it should be part of your investment process.
If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets here.
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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.
