What trends should we look for it we want to identify stocks that can multiply in value over the long term? Typically, we’ll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. If you see this, it typically means it’s a company with a great business model and plenty of profitable reinvestment opportunities. Although, when we looked at ESCO Technologies (NYSE:ESE), it didn’t seem to tick all of these boxes.
For those that aren’t sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for ESCO Technologies:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets – Current Liabilities)
0.062 = US$84m ÷ (US$1.6b – US$278m) (Based on the trailing twelve months to March 2022).
So, ESCO Technologies has an ROCE of 6.2%. Ultimately, that’s a low return and it under-performs the Machinery industry average of 9.9%.
View our latest analysis for ESCO Technologies
In the above chart we have measured ESCO Technologies’ prior ROCE against its prior performance, but the future is arguably more important. If you’re interested, you can view the analysts predictions in our free report on analyst forecasts for the company.
In terms of ESCO Technologies’ historical ROCE movements, the trend isn’t fantastic. To be more specific, ROCE has fallen from 8.5% over the last five years. Meanwhile, the business is utilizing more capital but this hasn’t moved the needle much in terms of sales in the past 12 months, so this could reflect longer term investments. It’s worth keeping an eye on the company’s earnings from here on to see if these investments do end up contributing to the bottom line.
Bringing it all together, while we’re somewhat encouraged by ESCO Technologies’ reinvestment in its own business, we’re aware that returns are shrinking. Unsurprisingly, the stock has only gained 9.8% over the last five years, which potentially indicates that investors are accounting for this going forward. Therefore, if you’re looking for a multi-bagger, we’d propose looking at other options.
ESCO Technologies could be trading at an attractive price in other respects, so you might find our free intrinsic value estimation on our platform quite valuable.
While ESCO Technologies 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.
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
These supercharged growth stocks have the tools and intangibles necessary to make patient investors a lot richer.
For some amateur investors, a plunging market is a chance to buy shares on the cheap. Many of these risk-tolerant investors have something in common: They don’t need the money soon.
In this article we present the list of 10 Stocks Billionaire Ken Fisher May Never Sell. Click to skip ahead and see the 5 Stocks Billionaire Ken Fisher May Never Sell. Chevron Corporation (NYSE:CVX), Merck & Co., Inc. (NYSE:MRK), and The Procter & Gamble Company (NYSE:PG) are some of the longest-term holdings of billionaire money manager […]
(Bloomberg) — After drawing foreign capital into China’s markets for years, President Xi Jinping is now facing the risk of a nasty period of financial de-globalization. Investors point to one main reason why: Xi’s own policies.Most Read from BloombergThis Could Be the Start of a Dollar ‘Doom Loop’ Like No OtherWall Street Set for New ETF Gold Rush as Single-Stock Era BeginsSupply Chains Inching Back to Normal Brace for Headwinds of Softer DemandPakistan’s Imran Khan Leads Ruling Coalition in Ke
Warren Buffett’s long-term outlook on investments has proven successful over the years, with Berkshire Hathaway (NYSE: BRK-A) outperforming the S&P 500 in total returns by about 84% over the past 20 years. If there’s one thing that’s made Buffett one of the most successful investors in history, it’s his commitment to his strategy. While several new investment techniques and algorithms have come and gone over the years, Buffett has maintained his fairly simple strategy of picking solid companies
After a couple years of underperforming the S&P 500, CEO Warren Buffett and Berkshire Hathaway have returned to crushing the market in 2022. The investment conglomerate's value-focused approach to portfolio composition and penchant for identifying sturdy businesses have helped its stock holdings significantly outperform the market at large. With the market outlook still looking turbulent, the Berkshire portfolio may be a good place to turn to for stock-picking inspiration, and dividend-paying companies in the cohort could be particularly well suited to generate returns in the current climate.
The right dividend stocks can shower investors with reliable passive income. Picking companies that are well-established in thriving industries with track records of dividend growth is as close to a guarantee of future dividend growth as possible. Here are three quality dividend stocks that appear positioned to grow their dividends for many more years.
Using technical analysis of the charts of those stocks, and, when appropriate, recent actions and grades from TheStreet's Quant Ratings, we zero in on three names. While we will not be weighing in with fundamental analysis, we hope this piece will give investors interested in stocks on the way down a good starting point to do further homework on the names. Penumbra Inc. recently was downgraded to Sell with a D+ rating by TheStreet's Quant Ratings.
Healthcare is a massive industry; worldwide healthcare spending exceeded $8 trillion yearly in 2020 and 2021. Such an essential and lucrative field is fertile ground for great stocks. Johnson & Johnson (NYSE: JNJ) is arguably the top blue chip stock in the healthcare industry.
Policy makers are leaning against a full-point interest-rate increase at their next meeting despite the inflation surge in June.
Investing in equal parts of these three industry-leading businesses provides a dividend yield above 3%.
“The longer this goes on, the more difficult it is to realize any upside in risk assets,” FHN Financial's Jim Vogel said.
In times like this investors looking for safe income should look toward high-quality companies such as the Dividend Kings, which have all increased their dividends for over 50 consecutive years. Altria is a consumer staples giant. Altria also has a 10% ownership stake in global beer giant Anheuser-Busch Inbev , in addition to large stakes in Juul, a vaping products manufacturer and distributor, as well as cannabis company Cronos Group .
Buying a stock is easy, but buying the right stock without a time-tested strategy is incredibly hard. So what are the best stocks to buy now or put on a watchlist?
The market rally battled back last week but faces key resistance once again. Tesla and EV rival BYD have big news due.
In this article we are going to estimate the intrinsic value of ConocoPhillips ( NYSE:COP ) by taking the expected…
This week's economic calendar includes several U.S. housing-market data releases and a pair of monetary policy decisions from abroad.
(Bloomberg) — Oil dipped as investors weighed the odds of more supply from the Middle East after a landmark trip to the region by US President Joe Biden.Most Read from BloombergThis Could Be the Start of a Dollar ‘Doom Loop’ Like No OtherWall Street Set for New ETF Gold Rush as Single-Stock Era BeginsSupply Chains Inching Back to Normal Brace for Headwinds of Softer DemandPakistan’s Imran Khan Leads Ruling Coalition in Key ElectionWest Texas Intermediate eased toward $97 a barrel after last wee
Earnings season is upon us. The company's revenue grew by 25% year over year to $565.4 million. The company reported a net loss of $6.7 billion, although $6.6 billion of that was due to an impairment charge related to its 2020 acquisition of Livongo Health.
Many people, like you, try to strike some sort of balance between living in the moment and paying for the necessities now and in the future. First, you need to think about what your annual income needs to be in retirement to meet your cost of living, plus any emergencies, such as a health crisis or an unexpected move. Are you just trying to make it last until Social Security kicks in, or are you intending to see this money last your lifetime?