Yahoo Finance IRADIMED (NASDAQ:IRMD) Is Achieving High Returns On Its Capital
There are a few key trends to look for if we want to identify the next multi-bagger. 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. And in light of that, the trends we're seeing at IRADIMED's (NASDAQ:IRMD) look very promising so lets take a look.
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. The formula for this calculation on IRADIMED is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.26 = US$21m ÷ (US$88m - US$7.6m) (Based on the trailing twelve months to March 2024).
Therefore, IRADIMED has an ROCE of 26%. That's a fantastic return and not only that, it outpaces the average of 11% earned by companies in a similar industry.
See our latest analysis for IRADIMED
Above you can see how the current ROCE for IRADIMED 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 IRADIMED for free.
So How Is IRADIMED's ROCE Trending?
Investors would be pleased with what's happening at IRADIMED. Over the last five years, returns on capital employed have risen substantially to 26%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 63%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.
The Bottom Line On IRADIMED's ROCE
A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what IRADIMED has. Since the stock has returned a staggering 115% to shareholders over the last five years, it looks like investors are recognizing these changes. 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 a final note, we've found 1 warning sign for IRADIMED that we think you should be aware of.
High returns are a key ingredient to strong performance, so check out our free list ofstocks 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.
