The Returns At Alliant Energy (NASDAQ:LNT) Aren't Growing

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. However, after briefly looking over the numbers, we don't think Alliant Energy (NASDAQ:LNT) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

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. To calculate this metric for Alliant Energy, this is the formula:

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

0.045 = US$734m ÷ (US$18b - US$1.6b) (Based on the trailing twelve months to June 2021).

So, Alliant Energy has an ROCE of 4.5%. Even though it's in line with the industry average of 4.6%, it's still a low return by itself.

Check out our latest analysis for Alliant Energy

roce

Above you can see how the current ROCE for Alliant Energy compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Alliant Energy.

What The Trend Of ROCE Can Tell Us

In terms of Alliant Energy's historical ROCE trend, it doesn't exactly demand attention. The company has consistently earned 4.5% for the last five years, and the capital employed within the business has risen 44% in that time. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

What We Can Learn From Alliant Energy's ROCE

In summary, Alliant Energy has simply been reinvesting capital and generating the same low rate of return as before. Since the stock has gained an impressive 92% over the last five years, investors must think there's better things to come. But if the trajectory of these underlying trends continue, we think the likelihood of it being a multi-bagger from here isn't high.

One more thing, we've spotted 1 warning sign facing Alliant Energy that you might find interesting.

While Alliant Energy may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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.

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