U.S. Markets close in 2 hrs 51 mins
  • S&P 500

    3,850.90
    +51.99 (+1.37%)
     
  • Dow 30

    31,178.00
    +247.48 (+0.80%)
     
  • Nasdaq

    13,445.75
    +248.57 (+1.88%)
     
  • Russell 2000

    2,157.21
    +6.08 (+0.28%)
     
  • Crude Oil

    53.30
    +0.32 (+0.60%)
     
  • Gold

    1,862.90
    +22.70 (+1.23%)
     
  • Silver

    25.69
    +0.37 (+1.46%)
     
  • EUR/USD

    1.2108
    -0.0025 (-0.2058%)
     
  • 10-Yr Bond

    1.0900
    -0.0020 (-0.18%)
     
  • Vix

    21.75
    -1.49 (-6.41%)
     
  • GBP/USD

    1.3639
    +0.0005 (+0.0368%)
     
  • USD/JPY

    103.6310
    -0.2610 (-0.2512%)
     
  • BTC-USD

    34,842.34
    +442.36 (+1.29%)
     
  • CMC Crypto 200

    688.86
    -11.75 (-1.68%)
     
  • FTSE 100

    6,740.39
    +27.44 (+0.41%)
     
  • Nikkei 225

    28,523.26
    -110.24 (-0.39%)
     

Will Corby Spirit and Wine (TSE:CSW.A) Repeat Its Return Growth Of The Past?

Simply Wall St
·3 min read

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Speaking of which, we noticed some great changes in Corby Spirit and Wine's (TSE:CSW.A) returns on capital, so let's have a look.

What is Return On Capital Employed (ROCE)?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed 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)

0.21 = CA$41m ÷ (CA$236m - CA$37m) (Based on the trailing twelve months to September 2020).

So, Corby Spirit and Wine has an ROCE of 21%. That's a fantastic return and not only that, it outpaces the average of 14% earned by companies in a similar industry.

Check out our latest analysis for Corby Spirit and Wine

roce
roce

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'd like to look at how Corby Spirit and Wine has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

What The Trend Of ROCE Can Tell Us

Corby Spirit and Wine is showing promise given that its ROCE is trending up and to the right. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 54% in that same time. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

The Bottom Line

In summary, we're delighted to see that Corby Spirit and Wine has been able to increase efficiencies and earn higher rates of return on the same amount of capital. Investors may not be impressed by the favorable underlying trends yet because over the last five years the stock has only returned 14% to shareholders. Given that, we'd look further into this stock in case it has more traits that could make it multiply in the long term.

One more thing, we've spotted 1 warning sign facing Corby Spirit and Wine that you might find interesting.

Corby Spirit and Wine 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.

This article by Simply Wall St is general in nature. 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.

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