Here's What To Make Of CACI International's (NYSE:CACI) Decelerating Rates Of Return

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. 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 CACI International (NYSE:CACI), it didn't seem to tick all of these boxes.

What Is Return On Capital Employed (ROCE)?

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. The formula for this calculation on CACI International is:

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

0.096 = US$539m ÷ (US$6.7b - US$1.1b) (Based on the trailing twelve months to March 2023).

So, CACI International has an ROCE of 9.6%. Ultimately, that's a low return and it under-performs the Professional Services industry average of 12%.

Check out our latest analysis for CACI International

Above you can see how the current ROCE for CACI International compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering CACI International here for free.

SWOT Analysis for CACI International

What Does the ROCE Trend For CACI International Tell Us?

The returns on capital haven't changed much for CACI International in recent years. The company has employed 63% more capital in the last five years, and the returns on that capital have remained stable at 9.6%. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

The Bottom Line

In conclusion, CACI International has been investing more capital into the business, but returns on that capital haven't increased. Investors must think there's better things to come because the stock has knocked it out of the park, delivering a 101% gain to shareholders who have held over the last five years. However, unless these underlying trends turn more positive, we wouldn't get our hopes up too high.

Like most companies, CACI International does come with some risks, and we've found 2 warning signs that you should be aware of.

While CACI International 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.