Yahoo Finance Acushnet Holdings (NYSE:GOLF) Shareholders Will Want The ROCE Trajectory To Continue
If you're looking for a multi-bagger, there's a few things to keep an eye out for. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, Acushnet Holdings (NYSE:GOLF) looks quite promising in regards to its trends of return on capital.
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. To calculate this metric for Acushnet Holdings, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.17 = US$312m ÷ (US$2.3b - US$456m) (Based on the trailing twelve months to June 2023).
Therefore, Acushnet Holdings has an ROCE of 17%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Leisure industry average of 16%.
Check out our latest analysis for Acushnet Holdings
In the above chart we have measured Acushnet Holdings' prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Acushnet Holdings.
How Are Returns Trending?
We like the trends that we're seeing from Acushnet Holdings. The data shows that returns on capital have increased substantially over the last five years to 17%. The amount of capital employed has increased too, by 30%. 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 Acushnet Holdings' ROCE
To sum it up, Acushnet Holdings has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And a remarkable 142% total return over the last five years tells us that investors are expecting more good things to come in the future. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.
Acushnet Holdings does come with some risks though, we found 3 warning signs in our investment analysis, and 1 of those is a bit concerning...
If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.
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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.
