Slowing Rates Of Return At Glacier Media (TSE:GVC) Leave Little Room For Excitement

What trends should we look for it we want to identify stocks that can multiply in value over the long term? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Although, when we looked at Glacier Media (TSE:GVC), it didn't seem to tick all of these boxes.

Understanding 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. The formula for this calculation on Glacier Media is:

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

0.029 = CA$6.5m ÷ (CA$270m - CA$47m) (Based on the trailing twelve months to September 2021).

Therefore, Glacier Media has an ROCE of 2.9%. Ultimately, that's a low return and it under-performs the Media industry average of 11%.

See our latest analysis for Glacier Media

Historical performance is a great place to start when researching a stock so above you can see the gauge for Glacier Media's ROCE against it's prior returns. If you'd like to look at how Glacier Media has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

How Are Returns Trending?

There hasn't been much to report for Glacier Media'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. So don't be surprised if Glacier Media doesn't end up being a multi-bagger in a few years time.

The Bottom Line

In a nutshell, Glacier Media has been trudging along with the same returns from the same amount of capital over the last five years. And in the last five years, the stock has given away 45% so the market doesn't look too hopeful on these trends strengthening any time soon. In any case, the stock doesn't have these traits of a multi-bagger discussed above, so if that's what you're looking for, we think you'd have more luck elsewhere.

One more thing to note, we've identified 3 warning signs with Glacier Media and understanding them should be part of your investment process.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.