Yahoo Finance Cracker Barrel Old Country Store's (NASDAQ:CBRL) Returns On Capital Not Reflecting Well On The Business
What trends should we look for it we want to identify stocks that can multiply in value over the long term? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Although, when we looked at Cracker Barrel Old Country Store (NASDAQ:CBRL), it didn't seem to tick all of these boxes.
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. The formula for this calculation on Cracker Barrel Old Country Store is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.066 = US$114m ÷ (US$2.2b - US$459m) (Based on the trailing twelve months to January 2024).
So, Cracker Barrel Old Country Store has an ROCE of 6.6%. In absolute terms, that's a low return and it also under-performs the Hospitality industry average of 9.6%.
View our latest analysis for Cracker Barrel Old Country Store
Above you can see how the current ROCE for Cracker Barrel Old Country Store 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 Cracker Barrel Old Country Store for free.
What Does the ROCE Trend For Cracker Barrel Old Country Store Tell Us?
When we looked at the ROCE trend at Cracker Barrel Old Country Store, we didn't gain much confidence. To be more specific, ROCE has fallen from 24% over the last five years. However it looks like Cracker Barrel Old Country Store might be reinvesting for long term growth because while capital employed has increased, the company's sales haven't changed much in the last 12 months. It may take some time before the company starts to see any change in earnings from these investments.
The Bottom Line On Cracker Barrel Old Country Store's ROCE
To conclude, we've found that Cracker Barrel Old Country Store is reinvesting in the business, but returns have been falling. Since the stock has declined 44% over the last five years, investors may not be too optimistic on this trend improving either. Therefore based on the analysis done in this article, we don't think Cracker Barrel Old Country Store has the makings of a multi-bagger.
If you want to know some of the risks facing Cracker Barrel Old Country Store we've found 2 warning signs (1 can't be ignored!) that you should be aware of before investing here.
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.
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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.
