Going have my Cayman office take a look at this ( ROCE ) info ??
Simply Wall St
November 19, 2021
If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. In light of that, when we looked at
Yellow (
NASDAQ:YELL) and its ROCE trend, we weren't exactly thrilled.
Understanding 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. The formula for this calculation on Yellow is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.039 = US$66m ÷ (US$2.5b - US$763m)
(Based on the trailing twelve months to September 2021).
So,
Yellow has an ROCE of 3.9%. In absolute terms, that's a low return and it also under-performs the Transportation industry average of 12%.