The Returns At Prince of Wales Country ClubI (SNSE:COUNTRY-A) Provide Us With Signs Of What's To Come

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. However, after briefly looking over the numbers, we don't think Prince of Wales Country ClubI (SNSE:COUNTRY-A) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

What is Return On Capital Employed (ROCE)?

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 Prince of Wales Country ClubI:

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

0.029 = CL$391m ÷ (CL$15b - CL$978m) (Based on the trailing twelve months to December 2019).

Thus, Prince of Wales Country ClubI has an ROCE of 2.9%. Even though it's in line with the industry average of 3.3%, it's still a low return by itself.

Check out our latest analysis for Prince of Wales Country ClubI

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you'd like to look at how Prince of Wales Country ClubI has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

So How Is Prince of Wales Country ClubI's ROCE Trending?

Over the past five years, Prince of Wales Country ClubI's ROCE and capital employed have both remained mostly flat. 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 Prince of Wales Country ClubI doesn't end up being a multi-bagger in a few years time.

What We Can Learn From Prince of Wales Country ClubI's ROCE

In a nutshell, Prince of Wales Country ClubI has been trudging along with the same returns from the same amount of capital over the last five years. And with the stock having returned a mere 29% in the last five years to shareholders, you could argue that they're aware of these lackluster trends. So if you're looking for a multi-bagger, the underlying trends indicate you may have better chances elsewhere.

If you'd like to know more about Prince of Wales Country ClubI, we've spotted 2 warning signs, and 1 of them is a bit unpleasant.

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. 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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