Why The 21% Return On Capital At United States Lime & Minerals (NASDAQ:USLM) Should Have Your Attention
What are the early trends we should look for to identify a stock that could multiply in value over the long term? Firstly, we’ll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, 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. With that in mind, the ROCE of United States Lime & Minerals (NASDAQ:USLM) looks great, so lets see what the trend can tell us.
What Is Return On Capital Employed (ROCE)?
Just to clarify if you’re unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. To calculate this metric for United States Lime & Minerals, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets – Current Liabilities)
0.21 = US$91m ÷ (US$464m – US$19m) (Based on the trailing twelve months to March 2024).
Therefore, United States Lime & Minerals has an ROCE of 21%. That’s a fantastic return and not only that, it outpaces the average of 11% earned by companies in a similar industry.
View our latest analysis for United States Lime & Minerals
Historical performance is a great place to start when researching a stock so above you can see the gauge for United States Lime & Minerals’ ROCE against it’s prior returns. If you’d like to look at how United States Lime & Minerals has performed in the past in other metrics, you can view this free graph of United States Lime & Minerals’ past earnings, revenue and cash flow.
What Can We Tell From United States Lime & Minerals’ ROCE Trend?
Investors would be pleased with what’s happening at United States Lime & Minerals. Over the last five years, returns on capital employed have risen substantially to 21%. 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 81%. So we’re very much inspired by what we’re seeing at United States Lime & Minerals thanks to its ability to profitably reinvest capital.
Our Take On United States Lime & Minerals’ ROCE
All in all, it’s terrific to see that United States Lime & Minerals is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a staggering 354% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it’s worth looking further into this stock because if United States Lime & Minerals can keep these trends up, it could have a bright future ahead.
While United States Lime & Minerals looks impressive, no company is worth an infinite price. The intrinsic value infographic for USLM helps visualize whether it is currently trading for a fair price.
If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high 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.
