Hub Group, Inc.’s (NASDAQ:HUBG) Stock Has Shown Weakness Lately But Financial Prospects Look Decent: Is The Market Wrong?

editorial-team@simplywallst.com (Simply Wall St)

Mon, Apr 7, 2025, 8:22 AM 4 min read

With its stock down 24% over the past three months, it is easy to disregard Hub Group (NASDAQ:HUBG). But if you pay close attention, you might find that its key financial indicators look quite decent, which could mean that the stock could potentially rise in the long-term given how markets usually reward more resilient long-term fundamentals. Particularly, we will be paying attention to Hub Group’s ROE today.

ROE or return on equity is a useful tool to assess how effectively a company can generate returns on the investment it received from its shareholders. Put another way, it reveals the company’s success at turning shareholder investments into profits.

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ROE can be calculated by using the formula:

Return on Equity = Net Profit (from continuing operations) ÷ Shareholders’ Equity

So, based on the above formula, the ROE for Hub Group is:

6.1% = US$104m ÷ US$1.7b (Based on the trailing twelve months to December 2024).

The ‘return’ is the yearly profit. Another way to think of that is that for every $1 worth of equity, the company was able to earn $0.06 in profit.

See our latest analysis for Hub Group

So far, we’ve learned that ROE is a measure of a company’s profitability. We now need to evaluate how much profit the company reinvests or “retains” for future growth which then gives us an idea about the growth potential of the company. Assuming everything else remains unchanged, the higher the ROE and profit retention, the higher the growth rate of a company compared to companies that don’t necessarily bear these characteristics.

When you first look at it, Hub Group’s ROE doesn’t look that attractive. We then compared the company’s ROE to the broader industry and were disappointed to see that the ROE is lower than the industry average of 11%. Although, we can see that Hub Group saw a modest net income growth of 12% over the past five years. We reckon that there could be other factors at play here. Such as – high earnings retention or an efficient management in place.

As a next step, we compared Hub Group’s net income growth with the industry, and pleasingly, we found that the growth seen by the company is higher than the average industry growth of 8.4%.