Yahoo Finance Returns On Capital Are A Standout For Hibbett (NASDAQ:HIBB)
Did you know there are some financial metrics that can provide clues of a potential multi-bagger? 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. With that in mind, the ROCE of Hibbett (NASDAQ:HIBB) looks great, so lets see what the trend can tell us.
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. To calculate this metric for Hibbett, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.20 = US$137m ÷ (US$909m - US$236m) (Based on the trailing twelve months to February 2024).
Therefore, Hibbett has an ROCE of 20%. In absolute terms that's a great return and it's even better than the Specialty Retail industry average of 13%.
View our latest analysis for Hibbett
Above you can see how the current ROCE for Hibbett 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 Hibbett .
So How Is Hibbett's ROCE Trending?
Investors would be pleased with what's happening at Hibbett. The data shows that returns on capital have increased substantially over the last five years to 20%. The amount of capital employed has increased too, by 80%. So we're very much inspired by what we're seeing at Hibbett thanks to its ability to profitably reinvest capital.
The Bottom Line
A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Hibbett has. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. In light of that, we think it's worth looking further into this stock because if Hibbett can keep these trends up, it could have a bright future ahead.
On a final note, we've found 1 warning sign for Hibbett that we think you should be aware of.
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.
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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.
