Marriott Vacations Worldwide (NYSE:VAC) Has Some Way To Go To Become A Multi-Bagger
Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Although, when we looked at Marriott Vacations Worldwide (NYSE:VAC), it didn't seem to tick all of these boxes.
What Is 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 Marriott Vacations Worldwide is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.091 = US$782m ÷ (US$9.5b - US$880m) (Based on the trailing twelve months to June 2023).
Therefore, Marriott Vacations Worldwide has an ROCE of 9.1%. Even though it's in line with the industry average of 8.7%, it's still a low return by itself.
Check out our latest analysis for Marriott Vacations Worldwide
Above you can see how the current ROCE for Marriott Vacations Worldwide compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Marriott Vacations Worldwide.
So How Is Marriott Vacations Worldwide's ROCE Trending?
There are better returns on capital out there than what we're seeing at Marriott Vacations Worldwide. The company has consistently earned 9.1% for the last five years, and the capital employed within the business has risen 219% in that time. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.
The Bottom Line
In summary, Marriott Vacations Worldwide has simply been reinvesting capital and generating the same low rate of return as before. And with the stock having returned a mere 1.4% in the last five years to shareholders, you could argue that they're aware of these lackluster trends. So if you're looking for a multi-bagger, the underlying trends indicate you may have better chances elsewhere.
On a final note, we found 2 warning signs for Marriott Vacations Worldwide (1 is a bit concerning) you should be aware of.
While Marriott Vacations Worldwide isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.
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.
