If you’re looking for a multi-bagger, there’s a few things to keep an eye out for. Firstly, we’ll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. With that in mind, the ROCE of Old Dominion Freight Line (NASDAQ:ODFL) looks great, so lets see what the trend can tell us.
Just to clarify if you’re unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. To calculate this metric for Old Dominion Freight Line, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets – Current Liabilities)
0.30 = US$1.5b ÷ (US$5.5b – US$557m) (Based on the trailing twelve months to March 2025).
Therefore, Old Dominion Freight Line has an ROCE of 30%. In absolute terms that’s a great return and it’s even better than the Transportation industry average of 9.1%.
View our latest analysis for Old Dominion Freight Line
In the above chart we have measured Old Dominion Freight Line’s prior ROCE against its prior performance, but the future is arguably more important. If you’d like, you can check out the forecasts from the analysts covering Old Dominion Freight Line for free.
We like the trends that we’re seeing from Old Dominion Freight Line. Over the last five years, returns on capital employed have risen substantially to 30%. The company is effectively making more money per dollar of capital used, and it’s worth noting that the amount of capital has increased too, by 41%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that’s why we’re impressed.
All in all, it’s terrific to see that Old Dominion Freight Line is reaping the rewards from prior investments and is growing its capital base. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 96% return over the last five years. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.
While Old Dominion Freight Line looks impressive, no company is worth an infinite price. The intrinsic value infographic for ODFL helps visualize whether it is currently trading for a fair price.
