Yahoo Finance Returns on Capital Paint A Bright Future For Shaver Shop Group (ASX:SSG)
To find a multi-bagger stock, what are the underlying trends we should look for in a business? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. And in light of that, the trends we're seeing at Shaver Shop Group's (ASX:SSG) look very promising so lets take a look.
Understanding Return On Capital Employed (ROCE)
If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Shaver Shop Group, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.23 = AU$23m ÷ (AU$147m - AU$47m) (Based on the trailing twelve months to December 2023).
So, Shaver Shop Group has an ROCE of 23%. That's a fantastic return and not only that, it outpaces the average of 18% earned by companies in a similar industry.
Check out our latest analysis for Shaver Shop Group
In the above chart we have measured Shaver Shop Group'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 Shaver Shop Group .
So How Is Shaver Shop Group's ROCE Trending?
The trends we've noticed at Shaver Shop Group are quite reassuring. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 23%. The amount of capital employed has increased too, by 33%. So we're very much inspired by what we're seeing at Shaver Shop Group thanks to its ability to profitably reinvest capital.
In Conclusion...
To sum it up, Shaver Shop Group has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And a remarkable 310% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if Shaver Shop Group can keep these trends up, it could have a bright future ahead.
One more thing, we've spotted 3 warning signs facing Shaver Shop Group that you might find interesting.
Shaver Shop Group is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.
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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.
