Yahoo Finance Returns On Capital At Delta Air Lines (NYSE:DAL) Have Stalled
If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. In light of that, when we looked at Delta Air Lines (NYSE:DAL) and its ROCE trend, we weren't exactly thrilled.
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. To calculate this metric for Delta Air Lines, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.13 = US$6.1b ÷ (US$75b - US$28b) (Based on the trailing twelve months to March 2024).
So, Delta Air Lines has an ROCE of 13%. In absolute terms, that's a satisfactory return, but compared to the Airlines industry average of 10% it's much better.
Check out our latest analysis for Delta Air Lines
Above you can see how the current ROCE for Delta Air Lines compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Delta Air Lines .
What The Trend Of ROCE Can Tell Us
Things have been pretty stable at Delta Air Lines, 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 Delta Air Lines to be a multi-bagger going forward.
What We Can Learn From Delta Air Lines' ROCE
We can conclude that in regards to Delta Air Lines' returns on capital employed and the trends, there isn't much change to report on. Since the stock has declined 11% over the last five years, investors may not be too optimistic on this trend improving either. On the whole, we aren't too inspired by the underlying trends and we think there may be better chances of finding a multi-bagger elsewhere.
If you want to continue researching Delta Air Lines, you might be interested to know about the 2 warning signs that our analysis has discovered.
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.
