Shareholders to benefit from repeat recent growth in Creightons returns (LON: CRL)
If we are to find a title that could multiply in the long run, what are the underlying trends that we need to look for? Among other things, we’ll want to see two things; first, a growth to recover on capital employed (ROCE) and on the other hand, an expansion of the amount capital employed. This shows us that it is a composing machine, capable of continually reinvesting its profits in the business and generating higher returns. And in light of this, the trends that we are observing at Creightons’ (LON: CRL) looks very promising, so let’s take a look.
Return on capital employed (ROCE): what is it?
For those who don’t know what ROCE is, it measures the amount of pre-tax profit a business can generate from the capital employed in its business. The formula for this calculation on Creightons is:
Return on capital employed = Profit before interest and taxes (EBIT) Ã· (Total assets – Current liabilities)
0.26 = Â£ 6.1million (Â£ 34million – Â£ 9.9million) (Based on the last twelve months up to March 2021).
Thereby, Creightons has a ROCE of 26%. In absolute terms, that’s a great return and it’s even better than the personal products industry average of 9.9%.
Check out our latest review for Creightons
Historical performance is a great place to start when looking for a stock. So above you can see Creightons’ ROCE gauge against its past returns. If you want to investigate more about Creightons past, check out this free graph of past income, income and cash flow.
So what’s the Creightons ROCE trend?
We love the trends we see from Creightons. Figures show that over the past five years, returns on capital employed have increased significantly to 26%. Basically the business is making more per dollar of capital invested and on top of that 230% more capital is also being used now. This may indicate that there are many opportunities to invest capital in-house and at ever higher rates, a common combination among multi-baggers.
Creightons ROCE result
A business that increases its returns on capital and can constantly reinvest in itself is a highly desirable trait, and that’s what Creightons has. And a remarkable 648% total return over the past five years tells us that investors expect more good things to come in the future. In light of this, we think it’s worth taking this title further because if Creightons can maintain these trends, he could have a bright future ahead of him.
If you want to continue your research on Creightons, you might be interested in knowing the 3 warning signs that our analysis found.
If you want to look for other stocks that have generated high returns, check out this free list of stocks with strong balance sheets that also generate high returns on equity.
This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.
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