There's Been No Shortage Of Growth Recently For Abbott Laboratories' (NYSE:ABT) Returns On Capital

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2 days ago

If you're looking for a multi-bagger, there's a few things to keep an eye out for. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So on that note, Abbott Laboratories (NYSE:ABT) looks quite promising in regards to its trends of return on capital.
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For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on Abbott Laboratories is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.11 = US$7.9b ÷ (US$81b - US$13b) (Based on the trailing twelve months to March 2025).
Therefore, Abbott Laboratories has an ROCE of 11%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Medical Equipment industry average of 10%.
See our latest analysis for Abbott Laboratories
In the above chart we have measured Abbott Laboratories' 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 Abbott Laboratories .
Investors would be pleased with what's happening at Abbott Laboratories. The data shows that returns on capital have increased substantially over the last five years to 11%. Basically the business is earning more per dollar of capital invested and in addition to that, 22% more capital is being employed now too. So we're very much inspired by what we're seeing at Abbott Laboratories thanks to its ability to profitably reinvest capital.
In summary, it's great to see that Abbott Laboratories can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 62% return over the last five years. In light of that, we think it's worth looking further into this stock because if Abbott Laboratories can keep these trends up, it could have a bright future ahead.
Like most companies, Abbott Laboratories does come with some risks, and we've found 1 warning sign that you should be aware of.
While Abbott Laboratories may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.
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