Yahoo Finance Century Communities' (NYSE:CCS) Returns On Capital Are Heading Higher
If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at Century Communities (NYSE:CCS) and its trend of ROCE, we really liked what we saw.
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. Analysts use this formula to calculate it for Century Communities:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.11 = US$407m ÷ (US$4.1b - US$487m) (Based on the trailing twelve months to March 2024).
Therefore, Century Communities has an ROCE of 11%. In isolation, that's a pretty standard return but against the Consumer Durables industry average of 15%, it's not as good.
Check out our latest analysis for Century Communities
In the above chart we have measured Century Communities' prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Century Communities for free.
The Trend Of ROCE
Century Communities is displaying some positive trends. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 11%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 73%. So we're very much inspired by what we're seeing at Century Communities thanks to its ability to profitably reinvest capital.
The Key Takeaway
To sum it up, Century Communities has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And a remarkable 221% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if Century Communities can keep these trends up, it could have a bright future ahead.
On a final note, we've found 1 warning sign for Century Communities that we think you should be aware of.
If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.
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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.
