Yahoo Finance Cimpress (NASDAQ:CMPR) Might Have The Makings Of A Multi-Bagger
If you're looking for a multi-bagger, there's a few things to keep an eye out for. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Speaking of which, we noticed some great changes in Cimpress' (NASDAQ:CMPR) returns on capital, so let's have a look.
What Is 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 Cimpress:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.18 = US$220m ÷ (US$1.9b - US$708m) (Based on the trailing twelve months to December 2023).
So, Cimpress has an ROCE of 18%. In absolute terms, that's a satisfactory return, but compared to the Commercial Services industry average of 10% it's much better.
Check out our latest analysis for Cimpress
In the above chart we have measured Cimpress' 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 Cimpress for free.
What The Trend Of ROCE Can Tell Us
Cimpress is showing promise given that its ROCE is trending up and to the right. The figures show that over the last five years, ROCE has grown 91% whilst employing roughly the same amount of capital. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.
The Key Takeaway
To bring it all together, Cimpress has done well to increase the returns it's generating from its capital employed. Since the stock has only returned 5.9% to shareholders over the last five years, the promising fundamentals may not be recognized yet by investors. Given that, we'd look further into this stock in case it has more traits that could make it multiply in the long term.
One final note, you should learn about the 2 warning signs we've spotted with Cimpress (including 1 which is a bit unpleasant) .
While Cimpress 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.
