Stock Analysis

We Like These Underlying Return On Capital Trends At VOXX International (NASDAQ:VOXX)

  •  Updated
NasdaqGS:VOXX
Source: Shutterstock

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, VOXX International (NASDAQ:VOXX) looks quite promising in regards to its trends of return on capital.

Understanding Return On Capital Employed (ROCE)

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. The formula for this calculation on VOXX International is:

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

0.017 = US$6.5m ÷ (US$541m - US$168m) (Based on the trailing twelve months to May 2022).

Therefore, VOXX International has an ROCE of 1.7%. In absolute terms, that's a low return and it also under-performs the Consumer Durables industry average of 17%.

Check out our latest analysis for VOXX International

roce
NasdaqGS:VOXX Return on Capital Employed September 7th 2022

Above you can see how the current ROCE for VOXX International 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.

So How Is VOXX International's ROCE Trending?

It's great to see that VOXX International has started to generate some pre-tax earnings from prior investments. While the business is profitable now, it used to be incurring losses on invested capital five years ago. Additionally, the business is utilizing 31% less capital than it was five years ago, and taken at face value, that can mean the company needs less funds at work to get a return. VOXX International could be selling under-performing assets since the ROCE is improving.

What We Can Learn From VOXX International's ROCE

In the end, VOXX International has proven it's capital allocation skills are good with those higher returns from less amount of capital. Since the total return from the stock has been almost flat over the last five years, there might be an opportunity here if the valuation looks good. With that in mind, we believe the promising trends warrant this stock for further investigation.

VOXX International does have some risks though, and we've spotted 2 warning signs for VOXX International that you might be interested in.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

Valuation is complex, but we're helping make it simple.

Find out whether VOXX International is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

About NasdaqGS:VOXX

VOXX International

VOXX International Corporation, together with its subsidiaries, designs, manufactures, and distributes automotive electronics, consumer electronics, and biometric products in the United States, Europe, and internationally.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation4
Future Growth3
Past Performance0
Financial Health3
Dividends0

Read more about these checks in the individual report sections or in our analysis model.

Good value with moderate growth potential.