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Return Trends At FLEETCOR Technologies (NYSE:FLT) Aren't Appealing

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There are a few key trends to look for if we want to identify the next multi-bagger. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. With that in mind, the ROCE of FLEETCOR Technologies (NYSE:FLT) looks decent, right now, so lets see what the trend of returns can tell us.

Return On Capital Employed (ROCE): What is it?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for FLEETCOR Technologies:

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

0.13 = US$973m ÷ (US$11b - US$4.0b) (Based on the trailing twelve months to December 2020).

Therefore, FLEETCOR Technologies has an ROCE of 13%. On its own, that's a standard return, however it's much better than the 11% generated by the IT industry.

Check out our latest analysis for FLEETCOR Technologies

roce
roce

Above you can see how the current ROCE for FLEETCOR Technologies compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

What Does the ROCE Trend For FLEETCOR Technologies Tell Us?

While the returns on capital are good, they haven't moved much. The company has consistently earned 13% for the last five years, and the capital employed within the business has risen 28% in that time. Since 13% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

Our Take On FLEETCOR Technologies' ROCE

To sum it up, FLEETCOR Technologies has simply been reinvesting capital steadily, at those decent rates of return. And the stock has followed suit returning a meaningful 87% to shareholders over the last five years. So even though the stock might be more "expensive" than it was before, we think the strong fundamentals warrant this stock for further research.

One more thing, we've spotted 2 warning signs facing FLEETCOR Technologies that you might find interesting.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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.