Investors Met With Slowing Returns on Capital At JELD-WEN Holding (NYSE:JELD)

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. 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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Although, when we looked at JELD-WEN Holding (NYSE:JELD), 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. To calculate this metric for JELD-WEN Holding, this is the formula:

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

0.082 = US$221m ÷ (US$3.5b - US$857m) (Based on the trailing twelve months to July 2023).

Therefore, JELD-WEN Holding has an ROCE of 8.2%. Ultimately, that's a low return and it under-performs the Building industry average of 15%.

View our latest analysis for JELD-WEN Holding

Above you can see how the current ROCE for JELD-WEN Holding 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.

How Are Returns Trending?

Things have been pretty stable at JELD-WEN Holding, with its capital employed and returns on that capital staying somewhat the same for the last five years. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. So don't be surprised if JELD-WEN Holding doesn't end up being a multi-bagger in a few years time.

The Bottom Line On JELD-WEN Holding's ROCE

We can conclude that in regards to JELD-WEN Holding's returns on capital employed and the trends, there isn't much change to report on. And investors appear hesitant that the trends will pick up because the stock has fallen 29% in the last five years. 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.

If you'd like to know more about JELD-WEN Holding, we've spotted 3 warning signs, and 1 of them is significant.

While JELD-WEN Holding isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.