If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at General Mills (NYSE:GIS) and its trend of ROCE, we really liked what we saw.
Understanding Return On Capital Employed (ROCE)
Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Analysts use this formula to calculate it for General Mills:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.15 = US$3.8b ÷ (US$31b - US$7.0b) (Based on the trailing twelve months to May 2024).
Thus, General Mills has an ROCE of 15%. On its own, that's a standard return, however it's much better than the 11% generated by the Food industry.
NYSE:GIS Return on Capital Employed June 29th 2024
In the above chart we have measured General Mills' 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 General Mills .
What Does the ROCE Trend For General Mills Tell Us?
General Mills has not disappointed with their ROCE growth. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 22% over the last five years. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. It's worth looking deeper into this though because while it's great that the business is more efficient, it might also mean that going forward the areas to invest internally for the organic growth are lacking.
The Key Takeaway
In summary, we're delighted to see that General Mills has been able to increase efficiencies and earn higher rates of return on the same amount of capital. Since the stock has only returned 37% to shareholders over the last five years, the promising fundamentals may not be recognized yet by investors. So with that in mind, we think the stock deserves further research.
General Mills does have some risks though, and we've spotted 1 warning sign for General Mills that you might be interested in.
While General Mills 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.
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を見つけるためには、しばしばクルとなる傾向があります。まず、成長している売上高を識別したいと考えます。そしてそれに加えて、絶え間なく増え続ける資産ベースです。これは、そのビジネスに継続的に収益を再投資し、高いリターンを生み出すことができる複利機械であることを示しています。そこで、モンタージュテクノロジー(SHSE:688008)とそのROCEトレンドを調べたとき、私たちは正直なところあまり興奮しませんでした。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)」。利益を増やし続けているビジネスであることを証明するには、利益をより高い割合で再投資している必要があります。NYSE:HD Return on Capital Employed 2024年4月10日資本雇用率の分析から、これは利益を増やし、リターン率を向上させるビジネスであることが示されています。 General Mills(NYSE:GIS)のROCEの傾向を見たとき、私たちは本当に見たものが好きでした。
General MillsはROCEの成長で期待を裏切りませんでした。データを見ると、ビジネスで雇用された資本が比較的横ばいのまま、ROCEが過去5年間で22%上昇したことがわかります。基本的に、企業は同じ資本からより高いリターンを生み出しており、それは会社の効率の改善の証拠です。そのため、さらに深く調べる価値があります。ビジネスがより効率的になっていることは素晴らしいことですが、内部的な成長のための投資の領域が欠けている可能性があるため、もう少し掘り下げる価値があります。
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。
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。