If we want to find a stock that could multiply over the long term, what are the underlying trends we should look 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. 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, Leidos Holdings (NYSE:LDOS) looks quite promising in regards to its trends of return on capital.
What Is 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 Leidos Holdings:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.15 = US$1.5b ÷ (US$13b - US$3.1b) (Based on the trailing twelve months to March 2024).
Therefore, Leidos Holdings has an ROCE of 15%. That's a relatively normal return on capital, and it's around the 14% generated by the Professional Services industry.
Above you can see how the current ROCE for Leidos Holdings 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 Leidos Holdings .
What The Trend Of ROCE Can Tell Us
Leidos Holdings is displaying some positive trends. Over the last five years, returns on capital employed have risen substantially to 15%. 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 38%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.
In Conclusion...
To sum it up, Leidos Holdings has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. In light of that, we think it's worth looking further into this stock because if Leidos Holdings can keep these trends up, it could have a bright future ahead.
One more thing, we've spotted 4 warning signs facing Leidos Holdings that you might find interesting.
While Leidos Holdings 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) 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.
株式市場で、長期的に成長している銘柄を探す場合、どのようなトレンドを探すべきでしょうか?中でも2つの要素を特に注目します。1つ目は、資本運用利益率(ROCE)が増加していること、2つ目は、資本運用額が拡大していることです。これは、企業が利益を再投資してビジネスを拡大し、より高い収益を生み出すことができることを示しています。その中でも、NASDAQ銘柄のMercadoLibre(メルカドリブレ)は、非常に有望なトレンドを示しているようです。以下に詳しく見ていきます。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。資本循環の報酬率を評価することで、その収益をビジネスに再投資して、より高い収益を生み出すことができる合成機械であることが分かります。このように、Leidosホールディングス(NYSE:LDOS)は、資本の収益率の傾向を考えると、かなり有望に見えます。