The Return Trends At Crookes Brothers (JSE:CKS) Look Promising

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Speaking of which, we noticed some great changes in Crookes Brothers' (JSE:CKS) returns on capital, so let's have a look.

What Is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Crookes Brothers is:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.074 = R111m ÷ (R1.8b - R314m) (Based on the trailing twelve months to March 2024).

So, Crookes Brothers has an ROCE of 7.4%. In absolute terms, that's a low return but it's around the Food industry average of 7.9%.

View our latest analysis for Crookes Brothers

roce

Historical performance is a great place to start when researching a stock so above you can see the gauge for Crookes Brothers' ROCE against it's prior returns. If you're interested in investigating Crookes Brothers' past further, check out this free graph covering Crookes Brothers' past earnings, revenue and cash flow.

How Are Returns Trending?

Crookes Brothers has not disappointed with their ROCE growth. The figures show that over the last five years, ROCE has grown 36% whilst employing roughly the same amount of capital. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

In Conclusion...

To bring it all together, Crookes Brothers has done well to increase the returns it's generating from its capital employed. Astute investors may have an opportunity here because the stock has declined 29% in the last five years. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

If you'd like to know more about Crookes Brothers, we've spotted 3 warning signs, and 2 of them make us uncomfortable.

While Crookes Brothers isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com