The Trend Of High Returns At Deckers Outdoor (NYSE:DECK) Has Us Very Interested

There are a few key trends to look for if we want to identify the next multi-bagger. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. And in light of that, the trends we're seeing at Deckers Outdoor's (NYSE:DECK) look very promising so lets take a look.

What is 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 Deckers Outdoor, this is the formula:

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

0.30 = US$553m ÷ (US$2.5b - US$728m) (Based on the trailing twelve months to December 2021).

Thus, Deckers Outdoor has an ROCE of 30%. In absolute terms that's a great return and it's even better than the Luxury industry average of 14%.

Check out our latest analysis for Deckers Outdoor

In the above chart we have measured Deckers Outdoor's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Deckers Outdoor.

So How Is Deckers Outdoor's ROCE Trending?

Deckers Outdoor is displaying some positive trends. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 30%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 75%. So we're very much inspired by what we're seeing at Deckers Outdoor thanks to its ability to profitably reinvest capital.

Our Take On Deckers Outdoor's ROCE

All in all, it's terrific to see that Deckers Outdoor is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a staggering 303% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if Deckers Outdoor can keep these trends up, it could have a bright future ahead.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 2 warning signs for Deckers Outdoor (of which 1 is significant!) that you should know about.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets here.

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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.