Yahoo Finance Boot Barn Holdings (NYSE:BOOT) Has More To Do To Multiply In Value Going Forward
If you're looking for a multi-bagger, there's a few things to keep an eye out for. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, the ROCE of Boot Barn Holdings (NYSE:BOOT) looks decent, right now, so lets see what the trend of returns can tell us.
Understanding Return On Capital Employed (ROCE)
If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Boot Barn Holdings is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.14 = US$200m ÷ (US$1.7b - US$313m) (Based on the trailing twelve months to March 2024).
Therefore, Boot Barn Holdings has an ROCE of 14%. That's a relatively normal return on capital, and it's around the 12% generated by the Specialty Retail industry.
View our latest analysis for Boot Barn Holdings
In the above chart we have measured Boot Barn Holdings' 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 Boot Barn Holdings for free.
What The Trend Of ROCE Can Tell Us
While the returns on capital are good, they haven't moved much. The company has consistently earned 14% for the last five years, and the capital employed within the business has risen 188% in that time. 14% is a pretty standard return, and it provides some comfort knowing that Boot Barn Holdings has consistently earned this amount. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.
Our Take On Boot Barn Holdings' ROCE
To sum it up, Boot Barn Holdings has simply been reinvesting capital steadily, at those decent rates of return. And long term investors would be thrilled with the 262% return they've received over the last five years. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.
If you want to continue researching Boot Barn Holdings, you might be interested to know about the 1 warning sign that our analysis has discovered.
While Boot Barn Holdings isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.
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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.
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