Stock Analysis

The Trend Of High Returns At Shaver Shop Group (ASX:SSG) Has Us Very Interested

  •  Updated
ASX:SSG
Source: Shutterstock

Did you know there are some financial metrics that can provide clues of a potential 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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So when we looked at the ROCE trend of Shaver Shop Group (ASX:SSG) we really liked what we saw.

Return On Capital Employed (ROCE): What is it?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for Shaver Shop Group:

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

0.27 = AU$26m ÷ (AU$153m - AU$58m) (Based on the trailing twelve months to December 2020).

So, Shaver Shop Group has an ROCE of 27%. In absolute terms that's a great return and it's even better than the Specialty Retail industry average of 20%.

Check out our latest analysis for Shaver Shop Group

roce
ASX:SSG Return on Capital Employed April 13th 2021

Above you can see how the current ROCE for Shaver Shop Group compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

So How Is Shaver Shop Group's ROCE Trending?

Shaver Shop Group is displaying some positive trends. Over the last five years, returns on capital employed have risen substantially to 27%. The amount of capital employed has increased too, by 81%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

Our Take On Shaver Shop Group's ROCE

To sum it up, Shaver Shop Group has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And a remarkable 228% total return over the last three years tells us that investors are expecting more good things to come in the future. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

If you want to continue researching Shaver Shop Group, you might be interested to know about the 1 warning sign that our analysis has discovered.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets here.

If you’re looking to trade Shaver Shop Group, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted


Valuation is complex, but we're helping make it simple.

Find out whether Shaver Shop Group is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis