U.S. markets closed
  • S&P Futures

    3,938.00
    +38.50 (+0.99%)
     
  • Dow Futures

    31,444.00
    +231.00 (+0.74%)
     
  • Nasdaq Futures

    11,990.25
    +149.50 (+1.26%)
     
  • Russell 2000 Futures

    1,792.00
    +19.80 (+1.12%)
     
  • Crude Oil

    111.02
    +0.74 (+0.67%)
     
  • Gold

    1,850.30
    +8.20 (+0.45%)
     
  • Silver

    21.89
    +0.21 (+0.97%)
     
  • EUR/USD

    1.0588
    +0.0026 (+0.24%)
     
  • 10-Yr Bond

    2.7870
    -0.0680 (-2.38%)
     
  • Vix

    29.43
    +0.08 (+0.27%)
     
  • GBP/USD

    1.2531
    +0.0035 (+0.28%)
     
  • USD/JPY

    127.4630
    -0.3870 (-0.30%)
     
  • BTC-USD

    30,178.77
    +687.92 (+2.33%)
     
  • CMC Crypto 200

    673.99
    +0.62 (+0.09%)
     
  • FTSE 100

    7,389.98
    +87.24 (+1.19%)
     
  • Nikkei 225

    27,004.52
    +265.49 (+0.99%)
     

The Returns At Consolidated Communications Holdings (NASDAQ:CNSL) Aren't Growing

  • Oops!
    Something went wrong.
    Please try again later.
·2 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.

There are a few key trends to look for if we want to identify the next multi-bagger. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing 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. However, after investigating Consolidated Communications Holdings (NASDAQ:CNSL), we don't think it's current trends fit the mold of a multi-bagger.

Understanding 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 Consolidated Communications Holdings, this is the formula:

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

0.038 = US$126m ÷ (US$3.6b - US$302m) (Based on the trailing twelve months to March 2022).

So, Consolidated Communications Holdings has an ROCE of 3.8%. Ultimately, that's a low return and it under-performs the Telecom industry average of 8.0%.

View our latest analysis for Consolidated Communications Holdings

roce
roce

Above you can see how the current ROCE for Consolidated Communications Holdings 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 Consolidated Communications Holdings Tell Us?

There are better returns on capital out there than what we're seeing at Consolidated Communications Holdings. The company has consistently earned 3.8% for the last five years, and the capital employed within the business has risen 72% in that time. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

The Bottom Line

In conclusion, Consolidated Communications Holdings has been investing more capital into the business, but returns on that capital haven't increased. Since the stock has declined 61% over the last five years, investors may not be too optimistic on this trend improving either. In any case, the stock doesn't have these traits of a multi-bagger discussed above, so if that's what you're looking for, we think you'd have more luck elsewhere.

One final note, you should learn about the 3 warning signs we've spotted with Consolidated Communications Holdings (including 1 which is concerning) .

While Consolidated Communications Holdings 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.