If you're looking for a multi-bagger, there's a few things to keep an eye out for. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing 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. With that in mind, the ROCE of Powell Industries (NASDAQ:POWL) looks great, so lets see what the trend can tell us.
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 Powell Industries:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.29 = US$117m ÷ (US$850m - US$442m) (Based on the trailing twelve months to March 2024).
So, Powell Industries has an ROCE of 29%. That's a fantastic return and not only that, it outpaces the average of 14% earned by companies in a similar industry.
NasdaqGS:POWL Return on Capital Employed May 2nd 2024
In the above chart we have measured Powell Industries' 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 Powell Industries .
What Can We Tell From Powell Industries' ROCE Trend?
The trends we've noticed at Powell Industries are quite reassuring. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 29%. The amount of capital employed has increased too, by 34%. So we're very much inspired by what we're seeing at Powell Industries thanks to its ability to profitably reinvest capital.
On a side note, we noticed that the improvement in ROCE appears to be partly fueled by an increase in current liabilities. Essentially the business now has suppliers or short-term creditors funding about 52% of its operations, which isn't ideal. And with current liabilities at those levels, that's pretty high.
What We Can Learn From Powell Industries' ROCE
To sum it up, Powell Industries 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 Powell Industries can keep these trends up, it could have a bright future ahead.
Powell Industries does have some risks though, and we've spotted 1 warning sign for Powell Industries that you might be interested in.
Powell Industries is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.
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.
マルチバガーを探している場合は、いくつかの注意点があります。 一般的なアプローチの1つは、資本雇用(ROCE)の収益が増加し、増加する資本雇用との一体的に評価します。 これは、増加する利益を再投資しているビジネスであることを示しています。Entergy(NYSE:ETR)の資本利回りに素晴らしい変化を発見したので、見てみましょう。 資本雇用における利回りが増加し、増加する資本雇用と共にある会社を見つけることは一般的な手法の1つです。これを見つけた場合、それは通常、素晴らしいビジネスモデルを持ち、多数の利益再投資機会がある企業であるということを意味します。Returns on capital employed (ROCE)とは何ですか? ROCEが何であるかわからない人のために、これは会社がビジネスで使用する資本から生み出す税引き前利益の量を測定するものです。MakeMyTripのこの計算の式は次のとおりです。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。これは資本雇用のROCE(投下資本利益率)であり、企業がビジネスに投資した資本でどの程度の税前利益を得たかを評価する指標です。そして、パウエルインダストリーズ(NASDAQ:POWL)のROCEは素晴らしいため、トレンドが何を教えてくれるか見てみましょう。
Return On Capital Employed(ROCE)とは何ですか?
アナリストは、この式を使用してPOWLのROCEを計算するために使用します:0.29 = US $ 117m ÷(US $ 850m- US $ 442m)
オーストラリアでは、moomooの投資商品及びサービスはMoomoo Securities Australia Limitedによって提供され、オーストラリア証券投資委員会(ASIC)の管理を受けております(AFSL No. 224663)。「金融サービスガイド」、「利用規約」、「プライバシーポリシー」などの詳細は、Moomoo Securities Australia Limitedのウェブサイトhttps://www.moomoo.com/auでご確認いただけます。
オーストラリアでは、moomooの投資商品及びサービスはMoomoo Securities Australia Limitedによって提供され、オーストラリア証券投資委員会(ASIC)の管理を受けております(AFSL No. 224663)。「金融サービスガイド」、「利用規約」、「プライバシーポリシー」などの詳細は、Moomoo Securities Australia Limitedのウェブサイトhttps://www.moomoo.com/auでご確認いただけます。