To find a multi-bagger stock, what are the underlying trends we should look for in a business? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Ultimately, this demonstrates that it’s a business that is reinvesting profits at increasing rates of return. However, after briefly looking over the numbers, we don’t think Knight-Swift Transportation Holdings (NYSE:KNX) has the makings of a multi-bagger going forward, but let’s have a look at why that may be.
For those who don’t know, ROCE is a measure of a company’s yearly pre-tax profit (its return), relative to the capital employed in the business. The formula for this calculation on Knight-Swift Transportation Holdings is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets – Current Liabilities)
0.023 = US$260m ÷ (US$13b – US$1.1b) (Based on the trailing twelve months to September 2025).
So, Knight-Swift Transportation Holdings has an ROCE of 2.3%. In absolute terms, that’s a low return and it also under-performs the Transportation industry average of 9.5%.
View our latest analysis for Knight-Swift Transportation Holdings
In the above chart we have measured Knight-Swift Transportation Holdings’ prior ROCE against its prior performance, but the future is arguably more important. If you’d like to see what analysts are forecasting going forward, you should check out our free analyst report for Knight-Swift Transportation Holdings .
When we looked at the ROCE trend at Knight-Swift Transportation Holdings, we didn’t gain much confidence. Over the last five years, returns on capital have decreased to 2.3% from 6.7% five years ago. However it looks like Knight-Swift Transportation Holdings might be reinvesting for long term growth because while capital employed has increased, the company’s sales haven’t changed much in the last 12 months. 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.
In summary, Knight-Swift Transportation Holdings is reinvesting funds back into the business for growth but unfortunately it looks like sales haven’t increased much just yet. Unsurprisingly, the stock has only gained 17% over the last five years, which potentially indicates that investors are accounting for this going forward. Therefore, if you’re looking for a multi-bagger, we’d propose looking at other options.
