Equifax (NYSE:EFX) Is Experiencing Growth In Returns On Capital

Yahoo

3 days ago

To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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, we've noticed some promising trends at Equifax (NYSE:EFX) so let's look a bit deeper.
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What Is 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. The formula for this calculation on Equifax is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.11 = US$1.1b ÷ (US$12b - US$1.9b) (Based on the trailing twelve months to June 2025).
Thus, Equifax has an ROCE of 11%. In isolation, that's a pretty standard return but against the Professional Services industry average of 14%, it's not as good.
View our latest analysis for Equifax
In the above chart we have measured Equifax's 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 Equifax .
What Can We Tell From Equifax's ROCE Trend?
Equifax is displaying some positive trends. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 11%. 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 39%. So we're very much inspired by what we're seeing at Equifax thanks to its ability to profitably reinvest capital.
What We Can Learn From Equifax's ROCE
A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Equifax has. And with a respectable 57% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.
On a separate note, we've found 1 warning sign for Equifax you'll probably want to know about.
If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.
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