The Return Trends At Elevance Health (NYSE:ELV) Look Promising

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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Speaking of which, we noticed some great changes in Elevance Health's (NYSE:ELV) returns on capital, so let's have a look.

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. Analysts use this formula to calculate it for Elevance Health:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.15 = US$10b ÷ (US$112b - US$44b) (Based on the trailing twelve months to March 2024).

So, Elevance Health has an ROCE of 15%. In absolute terms, that's a satisfactory return, but compared to the Healthcare industry average of 11% it's much better.

View our latest analysis for Elevance Health

roce

In the above chart we have measured Elevance Health's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Elevance Health .

So How Is Elevance Health's ROCE Trending?

We like the trends that we're seeing from Elevance Health. Over the last five years, returns on capital employed have risen substantially to 15%. The amount of capital employed has increased too, by 30%. So we're very much inspired by what we're seeing at Elevance Health thanks to its ability to profitably reinvest capital.

Our Take On Elevance Health's ROCE

All in all, it's terrific to see that Elevance Health is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a staggering 111% to shareholders over the last five years, it looks like investors are recognizing these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

Like most companies, Elevance Health does come with some risks, and we've found 1 warning sign that you should be aware of.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.