Shareholders Would Enjoy A Repeat Of Buckle's (NYSE:BKE) Recent Growth In Returns
If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base 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. So when we looked at the ROCE trend of Buckle (NYSE:BKE) we really liked what we saw.
What Is Return On Capital Employed (ROCE)?
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. To calculate this metric for Buckle, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.40 = US$284m ÷ (US$921m - US$216m) (Based on the trailing twelve months to October 2023).
So, Buckle has an ROCE of 40%. That's a fantastic return and not only that, it outpaces the average of 12% earned by companies in a similar industry.
View our latest analysis for Buckle
In the above chart we have measured Buckle's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.
The Trend Of ROCE
Investors would be pleased with what's happening at Buckle. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 40%. The amount of capital employed has increased too, by 54%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.
The Key Takeaway
All in all, it's terrific to see that Buckle is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a staggering 242% to shareholders over the last five years, it looks like investors are recognizing these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.
Buckle does come with some risks though, we found 2 warning signs in our investment analysis, and 1 of those is significant...
Buckle is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.
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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.
