To avoid investing in a business that's in decline, there's a few financial metrics that can provide early indications of aging. More often than not, we'll see a declining return on capital employed (ROCE) and a declining amount of capital employed. Basically the company is earning less on its investments and it is also reducing its total assets. On that note, looking into Kohl's (NYSE:KSS), we weren't too upbeat about how things were going.
Understanding Return On Capital Employed (ROCE)
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. Analysts use this formula to calculate it for Kohl's:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.063 = US$717m ÷ (US$14b - US$2.6b) (Based on the trailing twelve months to February 2024).
Therefore, Kohl's has an ROCE of 6.3%. Ultimately, that's a low return and it under-performs the Multiline Retail industry average of 11%.
NYSE:KSS Return on Capital Employed May 10th 2024
Above you can see how the current ROCE for Kohl's compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Kohl's .
How Are Returns Trending?
We are a bit worried about the trend of returns on capital at Kohl's. Unfortunately the returns on capital have diminished from the 15% that they were earning five years ago. 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 Kohl's to turn into a multi-bagger.
Our Take On Kohl's' ROCE
In summary, it's unfortunate that Kohl's is generating lower returns from the same amount of capital. Long term shareholders who've owned the stock over the last five years have experienced a 51% depreciation in their investment, so it appears the market might not like these trends either. That being the case, unless the underlying trends revert to a more positive trajectory, we'd consider looking elsewhere.
Kohl's does come with some risks though, we found 2 warning signs in our investment analysis, and 1 of those is significant...
While Kohl's 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.
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.
業種の衰退を回避するためには、若返りの初期兆候を提供するいくつかの財務指標があります。よくあることですが、投下資本利益率が低下しています。基本的に、会社の投資収益が低下し、総資産も減少しています。この点について、Kohl's(NYSE:KSS)を調べた結果、事業の進展にあまり楽観的ではありませんでした。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)」。資本雇用に対する収益率(ROCE)とは何ですか?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。ROCEとは何かわからない人のために、それは会社がビジネスで使っている投下資本から生成できる税引前利益の量を測定するものです。アナリストはKohl'sのROCEを計算するためにこの式を使用しています。0.063 = US$717m ÷(US$14b - US$2.6b)したがって、Kohl'sのROCEは6.3%です。最終的には、それは低いリターンであり、Multiline Retail業界の平均値11%を下回っています。NYSE:KSS Return on Capital Employed May 10th 2024
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。