Yahoo Finance Capital Investment Trends At Hallenstein Glasson Holdings (NZSE:HLG) Look Strong
If you're looking for a multi-bagger, there's a few things to keep an eye out 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So, when we ran our eye over Hallenstein Glasson Holdings' (NZSE:HLG) trend of ROCE, we really liked what we saw.
Return On Capital Employed (ROCE): What is it?
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. Analysts use this formula to calculate it for Hallenstein Glasson Holdings:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.33 = NZ$45m ÷ (NZ$191m - NZ$54m) (Based on the trailing twelve months to February 2021).
Therefore, Hallenstein Glasson Holdings has an ROCE of 33%. That's a fantastic return and not only that, it outpaces the average of 15% earned by companies in a similar industry.
View our latest analysis for Hallenstein Glasson Holdings
Historical performance is a great place to start when researching a stock so above you can see the gauge for Hallenstein Glasson Holdings' ROCE against it's prior returns. If you'd like to look at how Hallenstein Glasson Holdings has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.
What Does the ROCE Trend For Hallenstein Glasson Holdings Tell Us?
Hallenstein Glasson Holdings deserves to be commended in regards to it's returns. Over the past five years, ROCE has remained relatively flat at around 33% and the business has deployed 134% more capital into its operations. With returns that high, it's great that the business can continually reinvest its money at such appealing rates of return. You'll see this when looking at well operated businesses or favorable business models.
What We Can Learn From Hallenstein Glasson Holdings' ROCE
In summary, we're delighted to see that Hallenstein Glasson Holdings has been compounding returns by reinvesting at consistently high rates of return, as these are common traits of a multi-bagger. On top of that, the stock has rewarded shareholders with a remarkable 355% return to those who've held over the last five years. So even though the stock might be more "expensive" than it was before, we think the strong fundamentals warrant this stock for further research.
On the other side of ROCE, we have to consider valuation. That's why we have a FREE intrinsic value estimation on our platform that is definitely worth checking out.
If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets here.
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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