Is Triton International (NYSE:TRTN) Likely To Turn Things Around?
Did you know there are some financial metrics that can provide clues of a potential 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. In light of that, when we looked at Triton International (NYSE:TRTN) and its ROCE trend, we weren't exactly thrilled.
What is 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 Triton International, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.069 = US$662m ÷ (US$9.9b - US$283m) (Based on the trailing twelve months to March 2020).
So, Triton International has an ROCE of 6.9%. Ultimately, that's a low return and it under-performs the Trade Distributors industry average of 8.6%.
Check out our latest analysis for Triton International
In the above chart we have a measured Triton International's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Triton International here for free.
What Can We Tell From Triton International's ROCE Trend?
The returns on capital haven't changed much for Triton International in recent years. The company has consistently earned 6.9% for the last five years, and the capital employed within the business has risen 106% in that time. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.
What We Can Learn From Triton International's ROCE
As we've seen above, Triton International's returns on capital haven't increased but it is reinvesting in the business. Since the stock has declined 1.7% over the last three years, investors may not be too optimistic on this trend improving either. On the whole, we aren't too inspired by the underlying trends and we think there may be better chances of finding a multi-bagger elsewhere.
Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 3 warning signs for Triton International (of which 2 shouldn't be ignored!) that you should know about.
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.
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