Here's What To Make Of TrueBlue's (NYSE:TBI) Decelerating Rates Of Return
If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Although, when we looked at TrueBlue (NYSE:TBI), it didn't seem to tick all of these boxes.
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 TrueBlue:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.089 = US$69m ÷ (US$1.0b - US$243m) (Based on the trailing twelve months to December 2022).
Thus, TrueBlue has an ROCE of 8.9%. Ultimately, that's a low return and it under-performs the Professional Services industry average of 12%.
Check out our latest analysis for TrueBlue
Above you can see how the current ROCE for TrueBlue compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering TrueBlue here for free.
So How Is TrueBlue's ROCE Trending?
There hasn't been much to report for TrueBlue's returns and its level of capital employed because both metrics have been steady for the past five years. This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. With that in mind, unless investment picks up again in the future, we wouldn't expect TrueBlue to be a multi-bagger going forward.
What We Can Learn From TrueBlue's ROCE
We can conclude that in regards to TrueBlue's returns on capital employed and the trends, there isn't much change to report on. Since the stock has declined 32% over the last five years, investors may not be too optimistic on this trend improving either. Therefore based on the analysis done in this article, we don't think TrueBlue has the makings of a multi-bagger.
TrueBlue could be trading at an attractive price in other respects, so you might find our free intrinsic value estimation on our platform quite valuable.
For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and 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.
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