There are a few key trends to look for if we want to identify the next multi-bagger. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So when we looked at Wix.com (NASDAQ:WIX) and its trend of ROCE, we really liked what we saw.
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 Wix.com, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.027 = US$24m ÷ (US$1.7b - US$813m) (Based on the trailing twelve months to March 2024).
Therefore, Wix.com has an ROCE of 2.7%. In absolute terms, that's a low return and it also under-performs the IT industry average of 11%.
NasdaqGS:WIX Return on Capital Employed June 10th 2024
In the above chart we have measured Wix.com's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Wix.com for free.
The Trend Of ROCE
Wix.com has recently broken into profitability so their prior investments seem to be paying off. The company was generating losses five years ago, but now it's earning 2.7% which is a sight for sore eyes. And unsurprisingly, like most companies trying to break into the black, Wix.com is utilizing 56% more capital than it was five years ago. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.
Another thing to note, Wix.com has a high ratio of current liabilities to total assets of 48%. This can bring about some risks because the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. Ideally we'd like to see this reduce as that would mean fewer obligations bearing risks.
What We Can Learn From Wix.com's ROCE
In summary, it's great to see that Wix.com has managed to break into profitability and is continuing to reinvest in its business. Considering the stock has delivered 17% to its stockholders over the last five years, it may be fair to think that investors aren't fully aware of the promising trends yet. So with that in mind, we think the stock deserves further research.
If you'd like to know about the risks facing Wix.com, we've discovered 3 warning signs that you should be aware of.
While Wix.com 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.
次のマルチバッガーを特定するために注目すべきいくつかの重要な動向があります。通常、東gの成長傾向に注目する必要があります。 これに伴い、資産のベースが拡大していることを確認する必要があります。これにより、連続して収益を企業に再投資し、より高い収益を生み出すことができる複利機械であることがわかります。Torrid Holdings(NYSE:CURV)を見てみましょう。現時点で高いROCEを持っていますが、リターンのトレンドを確認しましょう。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)」。増え続ける売上高(revenue)はROCEのトレンドの中にあります。このように見ると、優れたビジネスモデルと豊富な収益性の高い再投資機会を持つ企業であることを示しています。しかし、Clearway Energy(NYSE:CWEN.A)を調査した結果、現在のトレンドが多倍化の形に合致していないと判断されました。NYSE:HD Return on Capital Employed 2024年4月10日資本雇用の収益率(ROCE)とは、事業に採用された資本から引き出される「利益(税引き前)」を測定するものであり、これを再投資可能な性格を持つ機械の特長と表現できます。したがって、当社はWix.com(NASDAQ:WIX)のROCE動向を調べたとき、私たちは見ているものがとても好きでした。
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。