Yahoo Finance Return Trends At Corby Spirit and Wine (TSE:CSW.A) Aren't Appealing
What trends should we look for it we want to identify stocks that can multiply in value over the long term? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. Although, when we looked at Corby Spirit and Wine (TSE:CSW.A), it didn't seem to tick all of these boxes.
Return On Capital Employed (ROCE): What is it?
Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. To calculate this metric for Corby Spirit and Wine, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.17 = CA$36m ÷ (CA$242m - CA$34m) (Based on the trailing twelve months to September 2021).
So, Corby Spirit and Wine has an ROCE of 17%. On its own, that's a standard return, however it's much better than the 12% generated by the Beverage industry.
Check out our latest analysis for Corby Spirit and Wine
Historical performance is a great place to start when researching a stock so above you can see the gauge for Corby Spirit and Wine's ROCE against it's prior returns. If you're interested in investigating Corby Spirit and Wine's past further, check out this free graph of past earnings, revenue and cash flow.
The Trend Of ROCE
There hasn't been much to report for Corby Spirit and Wine's returns and its level of capital employed because both metrics have been steady for the past five years. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. So don't be surprised if Corby Spirit and Wine doesn't end up being a multi-bagger in a few years time.
The Bottom Line
We can conclude that in regards to Corby Spirit and Wine's returns on capital employed and the trends, there isn't much change to report on. And with the stock having returned a mere 3.5% in the last five years to shareholders, you could argue that they're aware of these lackluster trends. Therefore, if you're looking for a multi-bagger, we'd propose looking at other options.
On a final note, we found 2 warning signs for Corby Spirit and Wine (1 doesn't sit too well with us) you should be aware of.
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.
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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