Yahoo Finance Sun Country Airlines Holdings' (NASDAQ:SNCY) Returns On Capital Are Heading Higher
There are a few key trends to look for if we want to identify the next multi-bagger. 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So on that note, Sun Country Airlines Holdings (NASDAQ:SNCY) looks quite promising in regards to its trends of return on capital.
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. Analysts use this formula to calculate it for Sun Country Airlines Holdings:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.11 = US$128m ÷ (US$1.6b - US$419m) (Based on the trailing twelve months to December 2023).
Therefore, Sun Country Airlines Holdings has an ROCE of 11%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Airlines industry average of 10%.
See our latest analysis for Sun Country Airlines Holdings
In the above chart we have measured Sun Country Airlines Holdings' 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 Sun Country Airlines Holdings for free.
What Can We Tell From Sun Country Airlines Holdings' ROCE Trend?
Investors would be pleased with what's happening at Sun Country Airlines Holdings. Over the last five years, returns on capital employed have risen substantially 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 166%. So we're very much inspired by what we're seeing at Sun Country Airlines Holdings thanks to its ability to profitably reinvest capital.
In Conclusion...
A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Sun Country Airlines Holdings has. Astute investors may have an opportunity here because the stock has declined 58% in the last three years. With that in mind, we believe the promising trends warrant this stock for further investigation.
If you'd like to know about the risks facing Sun Country Airlines Holdings, we've discovered 2 warning signs that you should be aware of.
While Sun Country Airlines Holdings 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.
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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.
