U.S. markets close in 3 hours 51 minutes
  • S&P 500

    4,123.70
    -16.36 (-0.40%)
     
  • Dow 30

    32,818.70
    -13.84 (-0.04%)
     
  • Nasdaq

    12,479.10
    -165.36 (-1.31%)
     
  • Russell 2000

    1,912.37
    -28.83 (-1.49%)
     
  • Crude Oil

    90.39
    -0.37 (-0.41%)
     
  • Gold

    1,812.50
    +7.30 (+0.40%)
     
  • Silver

    20.48
    -0.14 (-0.67%)
     
  • EUR/USD

    1.0234
    +0.0040 (+0.39%)
     
  • 10-Yr Bond

    2.7850
    +0.0200 (+0.72%)
     
  • GBP/USD

    1.2092
    +0.0010 (+0.08%)
     
  • USD/JPY

    134.9290
    -0.0440 (-0.03%)
     
  • BTC-USD

    23,089.33
    -901.96 (-3.76%)
     
  • CMC Crypto 200

    535.69
    -21.66 (-3.89%)
     
  • FTSE 100

    7,488.15
    +5.78 (+0.08%)
     
  • Nikkei 225

    27,999.96
    -249.28 (-0.88%)
     

Capital Investments At PageGroup (LON:PAGE) Point To A Promising Future

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
·2 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Ergo, when we looked at the ROCE trends at PageGroup (LON:PAGE), we liked what we saw.

Understanding Return On Capital Employed (ROCE)

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. The formula for this calculation on PageGroup is:

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

0.39 = UK£169m ÷ (UK£724m - UK£290m) (Based on the trailing twelve months to December 2021).

Thus, PageGroup has an ROCE of 39%. That's a fantastic return and not only that, it outpaces the average of 13% earned by companies in a similar industry.

Check out our latest analysis for PageGroup

roce
roce

In the above chart we have measured PageGroup's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

So How Is PageGroup's ROCE Trending?

In terms of PageGroup's history of ROCE, it's quite impressive. The company has consistently earned 39% for the last five years, and the capital employed within the business has risen 69% in that time. Returns like this are the envy of most businesses and given it has repeatedly reinvested at these rates, that's even better. You'll see this when looking at well operated businesses or favorable business models.

The Key Takeaway

In the end, the company has proven it can reinvest it's capital at high rates of returns, which you'll remember is a trait of a multi-bagger. And given the stock has only risen 7.9% over the last five years, we'd suspect the market is beginning to recognize these trends. That's why it could be worth your time looking into this stock further to discover if it has more traits of a multi-bagger.

PageGroup does have some risks though, and we've spotted 1 warning sign for PageGroup that you might be interested in.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high returns on equity.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.