Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. 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. 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 the ROCE trend of EMCOR Group (NYSE:EME) we really liked what we saw.
What Is 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 EMCOR Group:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.26 = US$766m ÷ (US$6.2b - US$3.2b) (Based on the trailing twelve months to September 2023).
Therefore, EMCOR Group has an ROCE of 26%. In absolute terms that's a great return and it's even better than the Construction industry average of 9.7%.
View our latest analysis for EMCOR Group
NYSE:EME Return on Capital Employed November 6th 2023
Above you can see how the current ROCE for EMCOR Group compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering EMCOR Group here for free.
What Can We Tell From EMCOR Group's ROCE Trend?
The trends we've noticed at EMCOR Group are quite reassuring. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 26%. Basically the business is earning more per dollar of capital invested and in addition to that, 24% 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.
For the record though, there was a noticeable increase in the company's current liabilities over the period, so we would attribute some of the ROCE growth to that. Essentially the business now has suppliers or short-term creditors funding about 52% of its operations, which isn't ideal. Given it's pretty high ratio, we'd remind investors that having current liabilities at those levels can bring about some risks in certain businesses.
The Key Takeaway
All in all, it's terrific to see that EMCOR Group is reaping the rewards from prior investments and is growing its capital base. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.
On the other side of ROCE, we have to consider valuation. That's why we have a FREE intrinsic value estimation on our platform that is definitely worth checking out.
If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning 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.
潜在的に成長する可能性があるビジネスを見つけるのは簡単ではありませんが、いくつかの主要な財務指標を見ることで可能です。ROCEが増加している企業を見つけることは一般的なアプローチです。これは、増加している資本雇用額と合わせて意味します。つまり、利益率の高い事業活動があり、再投資が可能であるということです。これは複利機械の特性です。したがって、EMCOR Group(NYSE:EME)のROCEトレンドを調べたとき、私たちは本当に気に入りました。ROCEとは、企業がビジネスに投資した資本でどれだけの税引前利益率(パーセンテージ)を稼いでいるかを評価するメトリックです。EMCOR Groupの場合、アナリストは次の式を使用して計算します。資産合計額-流動負債 = EBIT ÷ ROCE ROCE=US$766m ÷ (US$6.2b - US$3.2b) = 0.26 (2023年9月の過去12か月ベース)したがって、EMCOR GroupのROCEは26%です。これは、構造業界の平均値である9.7%よりも非常に優れた成果です。EMCOR Groupの最新の分析を見るには、ここをクリックしてください。NYSE:EME Return on Capital Employed November 6th 2023上記の図には、現在のEMCOR GroupのROCEが過去の資本利益に比べてどのようになっているかが示されていますが、過去からはあまり多くを知ることはできません。アナリストがEMCOR Groupをカバーしている予測を無料でチェックすることができます。リターン資本雇用額が増加していると同時に、いくつかの利益率が増加している企業を見つけるのは一般的なアプローチです。額資本雇用額EMCOR Group(NYSE:EME)のROCEトレンドを調べたとき、私たちは本当に気に入りました。
NYSE:EME Return on Capital Employed November 6th 2023上記の図には、現在のEMCOR GroupのROCEが過去の資本利益に比べてどのようになっているかが示されていますが、過去からはあまり多くを知ることはできません。アナリストがEMCOR Groupをカバーしている予測を無料でチェックすることができます。
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。