If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Speaking of which, we noticed some great changes in Rambus' (NASDAQ:RMBS) returns on capital, so let's have a look.
Understanding Return On Capital Employed (ROCE)
If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Rambus is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.10 = US$113m ÷ (US$1.2b - US$83m) (Based on the trailing twelve months to March 2024).
Therefore, Rambus has an ROCE of 10%. By itself that's a normal return on capital and it's in line with the industry's average returns of 9.7%.
NasdaqGS:RMBS Return on Capital Employed June 5th 2024
Above you can see how the current ROCE for Rambus 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 Rambus .
What Can We Tell From Rambus' ROCE Trend?
We're delighted to see that Rambus is reaping rewards from its investments and has now broken into profitability. The company was generating losses five years ago, but has managed to turn it around and as we saw earlier is now earning 10%, which is always encouraging. Interestingly, the capital employed by the business has remained relatively flat, so these higher returns are either from prior investments paying off or increased efficiencies. That being said, while an increase in efficiency is no doubt appealing, it'd be helpful to know if the company does have any investment plans going forward. Because in the end, a business can only get so efficient.
In Conclusion...
In summary, we're delighted to see that Rambus has been able to increase efficiencies and earn higher rates of return on the same amount of capital. 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 Rambus can keep these trends up, it could have a bright future ahead.
Rambus does come with some risks though, we found 3 warning signs in our investment analysis, and 2 of those are a bit concerning...
While Rambus 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.
潜在的なマルチバッガーを見つけるためには、しばしば示唆を与える潜在的な傾向があります。理想的には、ビジネスは2つの傾向を示します。1つ目は資本利用率の成長、2つ目は使用される資本の増加です。最終的に、これは利益を増加する率で再投資しているビジネスであることを示しています。Sanmina(NASDAQ:SANM)とそのROCEの傾向を見たときに、私たちは本当に見たものが好きでした。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)」。現在、Bumi Armada BerhadのROCEは12%です。それは、資本利回りの通常のリターンであり、エネルギーサービス業界が生成した9.8%のリターンに近い値です。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。資本の投入。これを見ると、多くの利益を再投資する素晴らしいビジネスモデルを持つ企業であることを示しています。そういうことなので、Rambus(NASDAQ:RMBS)の資本利回りに大きな変化があったことに注目しましょう。
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。