Logitech International (VTX LOGN) knows how to allocate capital effectively
It can be difficult to find a company that is likely to grow significantly. But, it is possible with a few key financial metrics. We will first want to see proven financial records. Return On capital employed (ROCE), which is growing, and secondly, expanding Base Capital employed. This indicates a company that has a solid business model and offers many profitable reinvestment options. The ROCE of Logitech International (VTX:LOGN) looks great, so lets see what the trend can tell us.
Understanding Return On Capital Employed (ROCE)
ROCE measures the company’s’return (pre-tax profit) from capital invested in its business. Logitech International uses this formula for its calculations:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets – Current Liabilities)
0.27 = US$659m ÷ (US$3.6b – US$1.2b) Based on the trailing twelve month period ending in September 2022.
Therefore, Logitech International has a ROCE score of 27% Absolute return is great, and even more than the 9.5% average in the Tech industry.
Check out our latest analysis for Logitech International
You can see below how Logitech International’s ROCE compares with its past returns on capital. But, there are only so many things you can infer from the past. You can see the predictions of our analysts if you are interested. No cost report on analyst forecasts for the company.
What the Trend of ROCE Can Teach Us
Logitech International is very encouraged by the trends that we have observed. Data shows that the returns on capital have increased to 27% over the last five year. The 135% increase in capital used has also been evident. This indicates that there are many opportunities to invest capital at ever higher rates and internally, which is a common combination among multi-baggers.
What Logitech International’s ROCE can teach us
Logitech International continues to reap the benefits of its previous investments and grows its capital base. These changes are evident in the fact that the stock has returned an impressive 80% to shareholders over five years. The stock has demonstrated promising trends so it is worth further research to determine if these trends will continue.
Another thing to remember, we have identified 2 warning signs with Logitech International Understanding these factors should be part your investment process.
You need high returns to achieve strong performance. So check out our No cost Liste ofstocks earning high returns on equity with solid balance sheets.
Give feedback about this article Are you concerned about the content? Get in touch Contact us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article is by Simply Wall St. It is general in nature. Our commentary is based on historical data, analyst forecasts and other unbiased information. We do not intend to provide financial advice. This analysis does not represent a recommendation to purchase or sell any stock and it does not consider your financial goals or financial situation. Our goal is to provide you with long-term, focused analysis based on fundamental data. Our analysis may not take into account the most recent price-sensitive company announcements and qualitative material. Simply Wall St does not hold any position in the stocks mentioned.
Participate in a Paid User Research Session
You’ll receive a Amazon Gift Card: US$30 Spend an hour helping us to create better tools for individual investors. Sign up here