CBIZ (NYSE:CBZ) Is Doing The Right Things To Multiply Its Share Price
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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, CBIZ (NYSE:CBZ) looks quite promising in regards to its trends of return on capital.
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 CBIZ, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.12 = US$189m ÷ (US$2.0b - US$461m) (Based on the trailing twelve months to March 2023).
Therefore, CBIZ has an ROCE of 12%. By itself that's a normal return on capital and it's in line with the industry's average returns of 12%.
View our latest analysis for CBIZ
In the above chart we have measured CBIZ'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.
The Trend Of ROCE
Investors would be pleased with what's happening at CBIZ. The data shows that returns on capital have increased substantially over the last five years to 12%. The amount of capital employed has increased too, by 70%. 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.
In Conclusion...
To sum it up, CBIZ has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And a remarkable 142% total return over the last five years tells us that investors are expecting more good things to come in the future. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.
If you want to continue researching CBIZ, you might be interested to know about the 2 warning signs that our analysis has discovered.
While CBIZ may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.
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.
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