U.S. Markets closed
  • S&P 500

    4,070.56
    +10.13 (+0.25%)
     
  • Dow 30

    33,978.08
    +28.67 (+0.08%)
     
  • Nasdaq

    11,621.71
    +109.30 (+0.95%)
     
  • Russell 2000

    1,911.46
    +8.39 (+0.44%)
     
  • Crude Oil

    79.38
    -1.63 (-2.01%)
     
  • Gold

    1,943.90
    -2.80 (-0.14%)
     
  • Silver

    23.73
    -0.30 (-1.23%)
     
  • EUR/USD

    1.0874
    -0.0018 (-0.1631%)
     
  • 10-Yr Bond

    3.5180
    +0.0250 (+0.72%)
     
  • Vix

    18.51
    -0.22 (-1.17%)
     
  • GBP/USD

    1.2395
    -0.0012 (-0.0967%)
     
  • USD/JPY

    129.8000
    -0.3530 (-0.2712%)
     
  • BTC-USD

    23,552.09
    +575.16 (+2.50%)
     
  • CMC Crypto 200

    526.66
    +9.65 (+1.87%)
     
  • FTSE 100

    7,765.15
    +4.04 (+0.05%)
     
  • Nikkei 225

    27,382.56
    +19.81 (+0.07%)
     

Schnitzer Steel Industries (NASDAQ:SCHN) Is Doing The Right Things To Multiply Its Share Price

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, 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. So when we looked at Schnitzer Steel Industries (NASDAQ:SCHN) and its trend of ROCE, we really liked what we saw.

Return On Capital Employed (ROCE): What Is It?

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. The formula for this calculation on Schnitzer Steel Industries is:

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

0.15 = US$210m ÷ (US$1.8b - US$382m) (Based on the trailing twelve months to August 2022).

So, Schnitzer Steel Industries has an ROCE of 15%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Metals and Mining industry average of 18%.

Check out our latest analysis for Schnitzer Steel Industries

roce
roce

Above you can see how the current ROCE for Schnitzer Steel Industries 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.

How Are Returns Trending?

Schnitzer Steel Industries is displaying some positive trends. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 15%. The amount of capital employed has increased too, by 91%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

Our Take On Schnitzer Steel Industries' ROCE

All in all, it's terrific to see that Schnitzer Steel Industries is reaping the rewards from prior investments and is growing its capital base. Considering the stock has delivered 31% to its stockholders over the last five years, it may be fair to think that investors aren't fully aware of the promising trends yet. So with that in mind, we think the stock deserves further research.

One more thing to note, we've identified 1 warning sign with Schnitzer Steel Industries and understanding this should be part of your investment process.

While Schnitzer Steel Industries 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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here