Returns On Capital Signal Tricky Times Ahead For 1-800-FLOWERS.COM (NASDAQ:FLWS)
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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. In light of that, when we looked at 1-800-FLOWERS.COM (NASDAQ:FLWS) and its ROCE trend, we weren't exactly thrilled.
What Is 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. The formula for this calculation on 1-800-FLOWERS.COM is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.034 = US$29m ÷ (US$1.2b - US$342m) (Based on the trailing twelve months to December 2023).
Therefore, 1-800-FLOWERS.COM has an ROCE of 3.4%. In absolute terms, that's a low return and it also under-performs the Specialty Retail industry average of 13%.
Check out our latest analysis for 1-800-FLOWERS.COM
Above you can see how the current ROCE for 1-800-FLOWERS.COM 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 1-800-FLOWERS.COM Tell Us?
When we looked at the ROCE trend at 1-800-FLOWERS.COM, we didn't gain much confidence. To be more specific, ROCE has fallen from 10% over the last five years. Given the business is employing more capital while revenue has slipped, this is a bit concerning. If this were to continue, you might be looking at a company that is trying to reinvest for growth but is actually losing market share since sales haven't increased.
In Conclusion...
We're a bit apprehensive about 1-800-FLOWERS.COM because despite more capital being deployed in the business, returns on that capital and sales have both fallen. Investors haven't taken kindly to these developments, since the stock has declined 46% from where it was five years ago. With underlying trends that aren't great in these areas, we'd consider looking elsewhere.
1-800-FLOWERS.COM could be trading at an attractive price in other respects, so you might find our free intrinsic value estimation on our platform quite valuable.
While 1-800-FLOWERS.COM 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.
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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.
