Latest news with #ROCE
Yahoo
21 hours ago
- Business
- Yahoo
Investors Could Be Concerned With Metrofile Holdings' (JSE:MFL) Returns On Capital
To avoid investing in a business that's in decline, there's a few financial metrics that can provide early indications of aging. Businesses in decline often have two underlying trends, firstly, a declining return on capital employed (ROCE) and a declining base of capital employed. This combination can tell you that not only is the company investing less, it's earning less on what it does invest. And from a first read, things don't look too good at Metrofile Holdings (JSE:MFL), so let's see why. AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early. 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. To calculate this metric for Metrofile Holdings, this is the formula: Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities) 0.15 = R188m ÷ (R1.5b - R216m) (Based on the trailing twelve months to December 2024). Therefore, Metrofile Holdings has an ROCE of 15%. In isolation, that's a pretty standard return but against the IT industry average of 39%, it's not as good. Check out our latest analysis for Metrofile Holdings Historical performance is a great place to start when researching a stock so above you can see the gauge for Metrofile Holdings' ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Metrofile Holdings. In terms of Metrofile Holdings' historical ROCE movements, the trend doesn't inspire confidence. To be more specific, the ROCE was 19% five years ago, but since then it has dropped noticeably. And on the capital employed front, the business is utilizing roughly the same amount of capital as it was back then. Since returns are falling and the business has the same amount of assets employed, this can suggest it's a mature business that hasn't had much growth in the last five years. If these trends continue, we wouldn't expect Metrofile Holdings to turn into a multi-bagger. In the end, the trend of lower returns on the same amount of capital isn't typically an indication that we're looking at a growth stock. Despite the concerning underlying trends, the stock has actually gained 36% over the last five years, so it might be that the investors are expecting the trends to reverse. Regardless, we don't like the trends as they are and if they persist, we think you might find better investments elsewhere. Metrofile Holdings does have some risks, we noticed 4 warning signs (and 2 which can't be ignored) we think you should 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. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
2 days ago
- Business
- Yahoo
Trellidor Holdings' (JSE:TRL) Returns Have Hit A Wall
Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at Trellidor Holdings (JSE:TRL), they do have a high ROCE, but we weren't exactly elated from how returns are trending. We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free. 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 Trellidor Holdings is: Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities) 0.23 = R71m ÷ (R446m - R133m) (Based on the trailing twelve months to December 2024). Thus, Trellidor Holdings has an ROCE of 23%. On its own, that's a very good return and it's on par with the returns earned by companies in a similar industry. Check out our latest analysis for Trellidor Holdings Historical performance is a great place to start when researching a stock so above you can see the gauge for Trellidor Holdings' ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Trellidor Holdings. Things have been pretty stable at Trellidor Holdings, with its capital employed and returns on that capital staying somewhat the same for the last five years. It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. Although current returns are high, we'd need more evidence of underlying growth for it to look like a multi-bagger going forward. Another point to note, we noticed the company has increased current liabilities over the last five years. This is intriguing because if current liabilities hadn't increased to 30% of total assets, this reported ROCE would probably be less than23% because total capital employed would be 23% ROCE could be even lower if current liabilities weren't 30% of total assets, because the the formula would show a larger base of total capital employed. With that in mind, just be wary if this ratio increases in the future, because if it gets particularly high, this brings with it some new elements of risk. In summary, Trellidor Holdings isn't compounding its earnings but is generating decent returns on the same amount of capital employed. And with the stock having returned a mere 29% in the last five years to shareholders, you could argue that they're aware of these lackluster trends. Therefore, if you're looking for a multi-bagger, we'd propose looking at other options. If you'd like to know about the risks facing Trellidor Holdings, we've discovered 1 warning sign that you should be aware of. If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high returns on equity. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Sign in to access your portfolio
Yahoo
2 days ago
- Business
- Yahoo
a2 Milk (NZSE:ATM) May Have Issues Allocating Its Capital
Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Having said that, from a first glance at a2 Milk (NZSE:ATM) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look. AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early. 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 a2 Milk is: Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities) 0.14 = NZ$202m ÷ (NZ$1.9b - NZ$474m) (Based on the trailing twelve months to December 2024). Therefore, a2 Milk has an ROCE of 14%. On its own, that's a standard return, however it's much better than the 9.6% generated by the Food industry. Check out our latest analysis for a2 Milk In the above chart we have measured a2 Milk's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for a2 Milk . When we looked at the ROCE trend at a2 Milk, we didn't gain much confidence. Around five years ago the returns on capital were 47%, but since then they've fallen to 14%. Meanwhile, the business is utilizing more capital but this hasn't moved the needle much in terms of sales in the past 12 months, so this could reflect longer term investments. 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. Bringing it all together, while we're somewhat encouraged by a2 Milk's reinvestment in its own business, we're aware that returns are shrinking. And investors appear hesitant that the trends will pick up because the stock has fallen 52% in the last five years. All in all, the inherent trends aren't typical of multi-baggers, so if that's what you're after, we think you might have more luck elsewhere. If you're still interested in a2 Milk it's worth checking out our to see if it's trading at an attractive price in other respects. 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. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Yahoo
3 days ago
- Business
- Yahoo
Tennant (NYSE:TNC) Shareholders Will Want The ROCE Trajectory To Continue
If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, we've noticed some promising trends at Tennant (NYSE:TNC) so let's look a bit deeper. We've discovered 1 warning sign about Tennant. View them for free. 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. The formula for this calculation on Tennant is: Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities) 0.11 = US$106m ÷ (US$1.2b - US$257m) (Based on the trailing twelve months to March 2025). Therefore, Tennant has an ROCE of 11%. That's a pretty standard return and it's in line with the industry average of 11%. See our latest analysis for Tennant In the above chart we have measured Tennant'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 Tennant for free. Tennant is showing promise given that its ROCE is trending up and to the right. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 31% in that same time. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects. As discussed above, Tennant appears to be getting more proficient at generating returns since capital employed has remained flat but earnings (before interest and tax) are up. Investors may not be impressed by the favorable underlying trends yet because over the last five years the stock has only returned 19% to shareholders. So with that in mind, we think the stock deserves further research. One more thing, we've spotted 1 warning sign facing Tennant that you might find interesting. 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. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Sign in to access your portfolio
Yahoo
3 days ago
- Business
- Yahoo
Here's What To Make Of Novanta's (NASDAQ:NOVT) Decelerating Rates Of Return
If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So, when we ran our eye over Novanta's (NASDAQ:NOVT) trend of ROCE, we liked what we saw. Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit. 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. To calculate this metric for Novanta, this is the formula: Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities) 0.11 = US$129m ÷ (US$1.4b - US$170m) (Based on the trailing twelve months to March 2025). Therefore, Novanta has an ROCE of 11%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Electronic industry average of 10%. Check out our latest analysis for Novanta Above you can see how the current ROCE for Novanta compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Novanta . The trend of ROCE doesn't stand out much, but returns on a whole are decent. The company has employed 72% more capital in the last five years, and the returns on that capital have remained stable at 11%. 11% is a pretty standard return, and it provides some comfort knowing that Novanta has consistently earned this amount. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders. In the end, Novanta has proven its ability to adequately reinvest capital at good rates of return. In light of this, the stock has only gained 15% over the last five years for shareholders who have owned the stock in this period. So to determine if Novanta is a multi-bagger going forward, we'd suggest digging deeper into the company's other fundamentals. If you're still interested in Novanta it's worth checking out our to see if it's trading at an attractive price in other respects. While Novanta isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
