Advertisement
U.S. markets closed
  • S&P 500

    5,254.35
    +5.86 (+0.11%)
     
  • Dow 30

    39,807.37
    +47.29 (+0.12%)
     
  • Nasdaq

    16,379.46
    -20.06 (-0.12%)
     
  • Russell 2000

    2,124.55
    +10.20 (+0.48%)
     
  • Crude Oil

    83.11
    -0.06 (-0.07%)
     
  • Gold

    2,254.80
    +16.40 (+0.73%)
     
  • Silver

    25.10
    +0.18 (+0.74%)
     
  • EUR/USD

    1.0776
    -0.0017 (-0.16%)
     
  • 10-Yr Bond

    4.2060
    +0.0100 (+0.24%)
     
  • GBP/USD

    1.2623
    +0.0000 (+0.00%)
     
  • USD/JPY

    151.3590
    -0.0130 (-0.01%)
     
  • Bitcoin USD

    69,865.35
    -625.44 (-0.89%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • FTSE 100

    7,952.62
    +20.64 (+0.26%)
     
  • Nikkei 225

    40,369.44
    +201.37 (+0.50%)
     

Oxford Industries (NYSE:OXM) Knows How To Allocate Capital Effectively

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base 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. And in light of that, the trends we're seeing at Oxford Industries' (NYSE:OXM) look very promising so lets take a look.

Return On Capital Employed (ROCE): What Is It?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Oxford Industries, this is the formula:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.24 = US$216m ÷ (US$1.1b - US$230m) (Based on the trailing twelve months to October 2022).

Thus, Oxford Industries has an ROCE of 24%. That's a fantastic return and not only that, it outpaces the average of 18% earned by companies in a similar industry.

See our latest analysis for Oxford Industries

roce
roce

Above you can see how the current ROCE for Oxford Industries 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 report for Oxford Industries.

What Can We Tell From Oxford Industries' ROCE Trend?

We like the trends that we're seeing from Oxford Industries. Over the last five years, returns on capital employed have risen substantially to 24%. The amount of capital employed has increased too, by 59%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

What We Can Learn From Oxford Industries' ROCE

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Oxford Industries has. Since the stock has returned a solid 45% to shareholders over the last five years, it's fair to say investors are beginning to recognize these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

Like most companies, Oxford Industries does come with some risks, and we've found 2 warning signs that you should be aware of.

Oxford 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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here

Advertisement