Returns Are Gaining Momentum At Quad/Graphics (NYSE:QUAD)

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Speaking of which, we noticed some great changes in Quad/Graphics' (NYSE:QUAD) returns on capital, so let's have a look.

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

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Quad/Graphics is:

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

0.17 = US$123m ÷ (US$1.2b - US$534m) (Based on the trailing twelve months to June 2025).

Thus, Quad/Graphics has an ROCE of 17%. In absolute terms, that's a satisfactory return, but compared to the Commercial Services industry average of 11% it's much better.

View our latest analysis for Quad/Graphics

In the above chart we have measured Quad/Graphics' 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 Quad/Graphics for free.

So How Is Quad/Graphics' ROCE Trending?

Quad/Graphics has not disappointed in regards to ROCE growth. We found that the returns on capital employed over the last five years have risen by 106%. That's not bad because this tells for every dollar invested (capital employed), the company is increasing the amount earned from that dollar. In regards to capital employed, Quad/Graphics appears to been achieving more with less, since the business is using 51% less capital to run its operation. If this trend continues, the business might be getting more efficient but it's shrinking in terms of total assets.

For the record though, there was a noticeable increase in the company's current liabilities over the period, so we would attribute some of the ROCE growth to that. The current liabilities has increased to 43% of total assets, so the business is now more funded by the likes of its suppliers or short-term creditors. And with current liabilities at those levels, that's pretty high.

The Bottom Line

From what we've seen above, Quad/Graphics has managed to increase it's returns on capital all the while reducing it's capital base. And with a respectable 54% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. In light of that, we think it's worth looking further into this stock because if Quad/Graphics can keep these trends up, it could have a bright future ahead.

If you'd like to know about the risks facing Quad/Graphics, we've discovered 1 warning sign that you should be aware of.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high 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.