Lifetime Brands (NASDAQ:LCUT) Might Have The Makings Of A Multi-Bagger

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing 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. Speaking of which, we noticed some great changes in Lifetime Brands' (NASDAQ:LCUT) returns on capital, so let's have a look.

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. Analysts use this formula to calculate it for Lifetime Brands:

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

0.077 = US$37m ÷ (US$603m - US$123m) (Based on the trailing twelve months to March 2024).

Thus, Lifetime Brands has an ROCE of 7.7%. In absolute terms, that's a low return and it also under-performs the Consumer Durables industry average of 15%.

See our latest analysis for Lifetime Brands

Above you can see how the current ROCE for Lifetime Brands 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 analyst report for Lifetime Brands .

The Trend Of ROCE

We're pretty happy with how the ROCE has been trending at Lifetime Brands. The figures show that over the last five years, returns on capital have grown by 50%. The company is now earning US$0.08 per dollar of capital employed. In regards to capital employed, Lifetime Brands appears to been achieving more with less, since the business is using 29% less capital to run its operation. A business that's shrinking its asset base like this isn't usually typical of a soon to be multi-bagger company.

What We Can Learn From Lifetime Brands' ROCE

In the end, Lifetime Brands has proven it's capital allocation skills are good with those higher returns from less amount of capital. Since the stock has only returned 13% to shareholders over the last five years, the promising fundamentals may not be recognized yet by investors. So exploring more about this stock could uncover a good opportunity, if the valuation and other metrics stack up.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 2 warning signs for Lifetime Brands (of which 1 doesn't sit too well with us!) that you should know about.

While Lifetime Brands may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com