Yahoo Finance Investors Could Be Concerned With 1-800-FLOWERS.COM's (NASDAQ:FLWS) Returns On Capital
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. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. In light of that, when we looked at 1-800-FLOWERS.COM (NASDAQ:FLWS) and its ROCE trend, we weren't exactly thrilled.
Return On Capital Employed (ROCE): What Is It?
For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. To calculate this metric for 1-800-FLOWERS.COM, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.023 = US$20m ÷ (US$1.2b - US$344m) (Based on the trailing twelve months to January 2023).
So, 1-800-FLOWERS.COM has an ROCE of 2.3%. In absolute terms, that's a low return and it also under-performs the Specialty Retail industry average of 15%.
Check out our latest analysis for 1-800-FLOWERS.COM
Above you can see how the current ROCE for 1-800-FLOWERS.COM 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 1-800-FLOWERS.COM here for free.
The Trend Of ROCE
On the surface, the trend of ROCE at 1-800-FLOWERS.COM doesn't inspire confidence. To be more specific, ROCE has fallen from 8.4% over the last five years. Meanwhile, the business is utilizing more capital but this hasn't moved the needle much in terms of sales in the past 12 months, so this could reflect longer term investments. It may take some time before the company starts to see any change in earnings from these investments.
The Bottom Line On 1-800-FLOWERS.COM's ROCE
In summary, 1-800-FLOWERS.COM is reinvesting funds back into the business for growth but unfortunately it looks like sales haven't increased much just yet. Additionally, the stock's total return to shareholders over the last five years has been flat, which isn't too surprising. All in all, the inherent trends aren't typical of multi-baggers, so if that's what you're after, we think you might have more luck elsewhere.
1-800-FLOWERS.COM does have some risks though, and we've spotted 2 warning signs for 1-800-FLOWERS.COM 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.
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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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