If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. With that in mind, we've noticed some promising trends at Fabrinet (NYSE:FN) so let's look a bit deeper.
Understanding Return On Capital Employed (ROCE)
For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for Fabrinet:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.16 = US$267m ÷ (US$2.2b - US$544m) (Based on the trailing twelve months to March 2024).
Thus, Fabrinet has an ROCE of 16%. On its own, that's a standard return, however it's much better than the 11% generated by the Electronic industry.
In the above chart we have measured Fabrinet's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for Fabrinet .
How Are Returns Trending?
We like the trends that we're seeing from Fabrinet. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 16%. Basically the business is earning more per dollar of capital invested and in addition to that, 87% more capital is being employed now too. So we're very much inspired by what we're seeing at Fabrinet thanks to its ability to profitably reinvest capital.
The Bottom Line
In summary, it's great to see that Fabrinet 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 a remarkable 387% total return over the last five years tells us that investors are expecting more good things to come in the future. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.
Fabrinet does have some risks though, and we've spotted 1 warning sign for Fabrinet that you might be interested in.
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
長期的に倍になる可能性のある株を見つけるためには、どのような基本的なトレンドを探す必要がありますか?まず、成長している売上高を特定し、その後、資産の ベースが増え続けていることを確認したいと思います。これは、ビジネスに収益を再投資して収益を高めることができる利益累算機であることを示しています。ただし、Zhejiang Crystal-Optech(SZSE:002273)を調査した結果、現在のトレンドが複合化された銘柄のようには見えないと判断しました。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日単に言えば、このようなビジネスは合成機械であり、収益をより高い利回りで継続的に再投資しています。このようなビジネスは、投資の資本から事前税収益を生み出すROCEと呼ばれる指標で計測されます。ファブリネット(NYSE: FN)で有望なトレンドを発見したので、少し深堀りしてみましょう。
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。