Did you know that there are several financial metrics that can provide clues to potential multibaggers? One common approach is to look for companies that: Return value Capital employed increasing with growth (ROCE) amount of capital employed. After all, this shows that this is a business that is increasing its profitability and reinvesting its profits. Speaking of which, I noticed some big changes. singapore airlines Let’s take a look at (SGX:C6L)’s return on equity.
Return on Capital Employed (ROCE): What is it?
For those who don’t know, ROCE is a measure of a company’s annual pre-tax profit (return) on the capital employed in the business. To calculate this metric for Singapore Airlines, use the following formula:
Return on Capital Employed = Earnings before interest and tax (EBIT) ÷ (Total assets – Current liabilities)
0.093 = S$3 billion ÷ (S$47 billion – S$14 billion) (Based on the previous 12 months to September 2023).
So, Singapore Airlines’ ROCE is 9.3%. This alone is a low return on equity, but it is comparable to the industry’s average return of 9.3%.
Check out our latest analysis for Singapore Airlines.
In the chart above, we measured Singapore Airlines’ previous ROCE against its previous performance, but the future is probably more important. If you wish, you can check out what the analysts covering Singapore Airlines are predicting here. free.
ROCE trends
While the absolute ROCE is still low, it’s good to see that it’s heading in the right direction. Over the past five years, the return on capital employed has increased significantly to 9.3%. The amount of capital used also increased by 49%. Increasing returns due to increased capital is common for multibaggers, which is why we’re impressed.
Important points
In summary, Singapore Airlines has proven that it can reinvest in its business and generate higher returns on the capital employed. This is great. Given that the company’s stock has returned 10% to shareholders over the past five years, it might be reasonable to think that investors haven’t fully recognized the promising trends yet. With that in mind, I’d like to take a closer look in case this strain has more characteristics that could allow it to thrive over the long term.
One last thing to note. two warning signs We found Singapore Airlines (one of which wasn’t a great fit for us).
Singapore Airlines doesn’t have the best profits, but check this out. free A list of companies with solid balance sheets and high return on equity.
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This article by Simply Wall St is general in nature. We provide commentary using only unbiased methodologies, based on historical data and analyst forecasts, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.