YETI Holdings (NYSE:YETI) Is Reinvesting To Multiply In Value

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. That's why when we briefly looked at YETI Holdings' (NYSE:YETI) ROCE trend, we were very happy with what we saw.

Understanding Return On Capital Employed (ROCE)

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 YETI Holdings is:

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

0.29 = US$253m ÷ (US$1.2b - US$352m) (Based on the trailing twelve months to June 2024).

So, YETI Holdings has an ROCE of 29%. That's a fantastic return and not only that, it outpaces the average of 13% earned by companies in a similar industry.

Check out our latest analysis for YETI Holdings

Above you can see how the current ROCE for YETI Holdings compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for YETI Holdings .

What Does the ROCE Trend For YETI Holdings Tell Us?

We'd be pretty happy with returns on capital like YETI Holdings. The company has consistently earned 29% for the last five years, and the capital employed within the business has risen 157% in that time. With returns that high, it's great that the business can continually reinvest its money at such appealing rates of return. If YETI Holdings can keep this up, we'd be very optimistic about its future.

The Bottom Line

In the end, the company has proven it can reinvest it's capital at high rates of returns, which you'll remember is a trait of a multi-bagger. Therefore it's no surprise that shareholders have earned a respectable 52% return if they held over the last five years. So while the positive underlying trends may be accounted for by investors, we still think this stock is worth looking into further.

While YETI Holdings looks impressive, no company is worth an infinite price. The intrinsic value infographic for YETI helps visualize whether it is currently trading for a fair price.

YETI Holdings is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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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.