Did you know there are some financial metrics that can provide clues of a potential multi-bagger? 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. Speaking of which, we noticed some great changes in Cirrus Logic's (NASDAQ:CRUS) returns on capital, so let's have a look.
Return On Capital Employed (ROCE): What Is It?
For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. To calculate this metric for Cirrus Logic, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.17 = US$345m ÷ (US$2.2b - US$186m) (Based on the trailing twelve months to March 2024).
Thus, Cirrus Logic has an ROCE of 17%. On its own, that's a standard return, however it's much better than the 9.5% generated by the Semiconductor industry.
NasdaqGS:CRUS Return on Capital Employed June 20th 2024
In the above chart we have measured Cirrus Logic's 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 Cirrus Logic .
What Can We Tell From Cirrus Logic's ROCE Trend?
We like the trends that we're seeing from Cirrus Logic. The data shows that returns on capital have increased substantially over the last five years to 17%. Basically the business is earning more per dollar of capital invested and in addition to that, 65% more capital is being employed now too. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.
In Conclusion...
In summary, it's great to see that Cirrus Logic can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.
If you'd like to know about the risks facing Cirrus Logic, we've discovered 1 warning sign that you should be aware of.
For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
潜在的なマルチバッガーの手掛かりを提供する財務指標がいくつかあることを知っていますか?一般的なアプローチの1つは、増え続ける資本と一緒にROCE(働いている資本利回り)が増加している企業を見つけることです。そのため、この企業は収益をビジネスに再投資して、より高い利益を生み出すことができるため、複合機と呼ばれます。ところで、Integral Ad Science Holding(NASDAQ:IAS)のROCE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。使用された資本の合計。これは、ビジネスに資金を再投資し、より高い収益を生成することができる複利計算機であることを示しています。ところで、Cirrus Logicの(NASDAQ:CRUS)資本利益率に大きな変化があることに気づきましたので、見てみましょう。
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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。