If you're looking for a multi-bagger, there's a few things to keep an eye out for. 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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Having said that, from a first glance at Cheesecake Factory (NASDAQ:CAKE) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.
Understanding Return On Capital Employed (ROCE)
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. Analysts use this formula to calculate it for Cheesecake Factory:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.071 = US$155m ÷ (US$2.8b - US$661m) (Based on the trailing twelve months to April 2024).
Thus, Cheesecake Factory has an ROCE of 7.1%. In absolute terms, that's a low return and it also under-performs the Hospitality industry average of 9.6%.
In the above chart we have measured Cheesecake Factory'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 Cheesecake Factory for free.
So How Is Cheesecake Factory's ROCE Trending?
On the surface, the trend of ROCE at Cheesecake Factory doesn't inspire confidence. Around five years ago the returns on capital were 15%, but since then they've fallen to 7.1%. However it looks like Cheesecake Factory might be reinvesting for long term growth because while capital employed has increased, the company's sales haven't changed much in the last 12 months. 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.
What We Can Learn From Cheesecake Factory's ROCE
Bringing it all together, while we're somewhat encouraged by Cheesecake Factory'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 16% in the last five years. On the whole, we aren't too inspired by the underlying trends and we think there may be better chances of finding a multi-bagger elsewhere.
Cheesecake Factory does have some risks, we noticed 3 warning signs (and 1 which is potentially serious) we think you should know about.
For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.
Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. This 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.
マルチバッグを探している場合、注目すべき点がいくつかあります。その中には、2つのことがあります。第一に、資本を利用した収益成長(ROCE)を見たいと思います。第二に、企業の投資資産額の拡大です。これらのことは、利益を増やし続けるビジネスであることを示しています。現在NIKE(NYSE:NKE)はROCEが高いですが、どのように収益が変化しているかを把握できるようにしましょう。資本利回り (ROCE)とは何ですか?わからない方には、ROCEは企業が事業に使用する資本から、税引き前利益をどれだけ生成できるかを測定します。アナリストは以下の式を使用して、Bumi Armada BerhadのROCEを計算します。「ROCE = 利息や税金を除いた利益 (EBIT) ÷ (総資産 - 流動負債)」。ROCEが成長するのは、事業に投下される資本が成長していることを意味し、Coupangが投下資本の拡大に取り組んでいることを示しています。Bumi Armada Berhadが前のROCEと前のパフォーマンスを比較した上図では、将来のROCEがより重要であるとされています。もし興味がある場合は、Bumi Armada Berhadの無料アナリストレポートをご覧いただけます。資本雇用の全セクター。基本的には、会社が継続的に再投資できる収益性の高いイニシアチブを持っていることを意味します。この特徴は、複利を生む機械の特徴でもあります。しかし、ナスダックのザチーズケーキファクトリー(NASDAQ:CAKE)を一目見て、どのように収益が推移しているかについては熱心ではありませんが、より深く調べてみましょう。