Canada markets close in 2 hours 28 minutes
  • S&P/TSX

    20,238.34
    -39.07 (-0.19%)
     
  • S&P 500

    3,965.37
    +7.74 (+0.20%)
     
  • DOW

    33,802.37
    -50.16 (-0.15%)
     
  • CAD/USD

    0.7388
    +0.0023 (+0.31%)
     
  • CRUDE OIL

    80.33
    +2.13 (+2.72%)
     
  • BTC-CAD

    22,662.02
    +383.97 (+1.72%)
     
  • CMC Crypto 200

    398.27
    -2.43 (-0.61%)
     
  • GOLD FUTURES

    1,764.50
    +0.80 (+0.05%)
     
  • RUSSELL 2000

    1,827.52
    -9.03 (-0.49%)
     
  • 10-Yr Bond

    3.7680
    +0.0200 (+0.53%)
     
  • NASDAQ

    11,064.53
    +80.75 (+0.74%)
     
  • VOLATILITY

    22.34
    +0.45 (+2.06%)
     
  • FTSE

    7,573.05
    +61.05 (+0.81%)
     
  • NIKKEI 225

    27,968.99
    -58.85 (-0.21%)
     
  • CAD/EUR

    0.7142
    +0.0016 (+0.22%)
     

Canlan Ice Sports (TSE:ICE) Has More To Do To Multiply In Value Going Forward

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. Although, when we looked at Canlan Ice Sports (TSE:ICE), it didn't seem to tick all of these boxes.

Understanding Return On Capital Employed (ROCE)

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. To calculate this metric for Canlan Ice Sports, this is the formula:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.054 = CA$4.6m ÷ (CA$112m - CA$27m) (Based on the trailing twelve months to June 2022).

So, Canlan Ice Sports has an ROCE of 5.4%. Ultimately, that's a low return and it under-performs the Hospitality industry average of 9.4%.

Check out our latest analysis for Canlan Ice Sports

roce
roce

Historical performance is a great place to start when researching a stock so above you can see the gauge for Canlan Ice Sports' ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of Canlan Ice Sports, check out these free graphs here.

What Does the ROCE Trend For Canlan Ice Sports Tell Us?

Things have been pretty stable at Canlan Ice Sports, with its capital employed and returns on that capital staying somewhat the same for the last five years. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. With that in mind, unless investment picks up again in the future, we wouldn't expect Canlan Ice Sports to be a multi-bagger going forward.

Our Take On Canlan Ice Sports' ROCE

We can conclude that in regards to Canlan Ice Sports' returns on capital employed and the trends, there isn't much change to report on. Unsurprisingly then, the total return to shareholders over the last five years has been flat. Therefore based on the analysis done in this article, we don't think Canlan Ice Sports has the makings of a multi-bagger.

Canlan Ice Sports does have some risks, we noticed 5 warning signs (and 2 which are a bit unpleasant) we think you should know about.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here