Shareholders Would Enjoy A Repeat Of Boise Cascade's (NYSE:BCC) Recent Growth In Returns

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should 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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. With that in mind, the ROCE of Boise Cascade (NYSE:BCC) looks great, so lets see what the trend can tell us.

Return On Capital Employed (ROCE): What Is It?

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 Boise Cascade is:

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

0.22 = US$636m ÷ (US$3.5b - US$594m) (Based on the trailing twelve months to December 2023).

Thus, Boise Cascade has an ROCE of 22%. In absolute terms that's a great return and it's even better than the Trade Distributors industry average of 13%.

Check out our latest analysis for Boise Cascade

In the above chart we have measured Boise Cascade's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Boise Cascade for free.

How Are Returns Trending?

The trends we've noticed at Boise Cascade are quite reassuring. Over the last five years, returns on capital employed have risen substantially to 22%. 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 136%. So we're very much inspired by what we're seeing at Boise Cascade thanks to its ability to profitably reinvest capital.

The Bottom Line

To sum it up, Boise Cascade has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And a remarkable 571% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if Boise Cascade can keep these trends up, it could have a bright future ahead.

Boise Cascade does come with some risks though, we found 3 warning signs in our investment analysis, and 1 of those is a bit concerning...

Boise Cascade is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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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.