Yahoo Finance The Return Trends At Altice USA (NYSE:ATUS) Look Promising
If you're looking for a multi-bagger, there's a few things to keep an eye out for. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's 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, Altice USA (NYSE:ATUS) looks quite promising in regards to its trends of return on capital.
Understanding Return On Capital Employed (ROCE)
If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Altice USA is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.082 = US$2.3b ÷ (US$33b - US$4.5b) (Based on the trailing twelve months to June 2022).
So, Altice USA has an ROCE of 8.2%. On its own that's a low return on capital but it's in line with the industry's average returns of 7.5%.
View our latest analysis for Altice USA
In the above chart we have measured Altice USA's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Altice USA here for free.
What Can We Tell From Altice USA's ROCE Trend?
Altice USA is showing promise given that its ROCE is trending up and to the right. The figures show that over the last five years, ROCE has grown 143% whilst employing roughly the same amount of capital. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. It's worth looking deeper into this though because while it's great that the business is more efficient, it might also mean that going forward the areas to invest internally for the organic growth are lacking.
Our Take On Altice USA's ROCE
In summary, we're delighted to see that Altice USA has been able to increase efficiencies and earn higher rates of return on the same amount of capital. Given the stock has declined 56% in the last five years, this could be a good investment if the valuation and other metrics are also appealing. With that in mind, we believe the promising trends warrant this stock for further investigation.
Altice USA does come with some risks though, we found 4 warning signs in our investment analysis, and 3 of those are potentially serious...
While Altice USA may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.
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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.
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