We love the Big 5 Sporting Goods (NASDAQ: BGFV) feedback and here is their trend

Finding a business that has the potential to grow significantly isn’t easy, but it is possible if we take a look at a few key financial metrics. Generally, we will want to notice a growing trend to return to on capital employed (ROCE) and at the same time, a based capital employed. Simply put, these types of businesses are dialing machines, which means they continually reinvest their profits at ever higher rates of return. Speaking of which, we have noticed some big changes in The 5 great sporting goods ” (NASDAQ: BGFV) returns on capital, so let’s take a look.

Understanding Return on Capital Employed (ROCE)

For those who don’t know what ROCE is, it measures the amount of pre-tax profit a business can generate from the capital employed in its business. The formula for this calculation on the Big 5 Sporting Goods is:

Return on capital employed = Profit before interest and taxes (EBIT) ÷ (Total assets – Current liabilities)

0.27 = US $ 137 million ÷ (US $ 745 million – US $ 240 million) (Based on the last twelve months up to October 2021).

Therefore, Big 5 Sporting Goods has a ROCE of 27%. In absolute terms, that’s a great return and it’s even better than the 20% specialty retail industry average.

NasdaqGS: BGFV Return on capital employed on January 9, 2022

In the graph above, we’ve measured Big 5 Sporting Goods’ past ROCE against its past performance, but arguably the future is more important. If you are interested, you can view analyst forecasts in our free analyst forecast report for the company.

What is the trend for returns?

The trends that we have noticed at Big 5 Sporting Goods are quite reassuring. Over the past five years, returns on capital employed have increased substantially to 27%. The company actually makes more money per dollar of capital used, and it should be noted that the amount of capital has also increased, by 101%. So we’re very inspired by what we’re seeing at Big 5 Sporting Goods through its ability to reinvest capital profitably.

In conclusion…

To sum up, Big 5 Sporting Goods has proven that it can reinvest in the business and generate higher returns on capital employed, which is great. And investors seem to expect more of that in the future, as the stock has rewarded shareholders with a 72% return over the past five years. That being said, we still believe that promising fundamentals mean the company deserves additional due diligence.

One more thing, we spotted 4 warning signs facing Big 5 Sporting Goods which you might find interesting.

If you want to look for other stocks that have generated high returns, check out this free list of stocks with strong balance sheets that also generate high returns on equity.

Do you have any feedback on this item? Are you worried about the content? Get in touch with us directly. You can also send an email to the editorial team (at) simplywallst.com.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only 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 into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Source link

Comments are closed.