Returns At BJ's Wholesale Club Holdings (NYSE:BJ) Are On The Way Up

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Speaking of which, we noticed some great changes in BJ's Wholesale Club Holdings' (NYSE:BJ) returns on capital, so let's have a look.

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 BJ's Wholesale Club Holdings is:

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

0.18 = US$792m ÷ (US$6.8b - US$2.5b) (Based on the trailing twelve months to May 2024).

Thus, BJ's Wholesale Club Holdings has an ROCE of 18%. In absolute terms, that's a satisfactory return, but compared to the Consumer Retailing industry average of 10% it's much better.

View our latest analysis for BJ's Wholesale Club Holdings

Above you can see how the current ROCE for BJ's Wholesale Club Holdings 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 BJ's Wholesale Club Holdings .

How Are Returns Trending?

BJ's Wholesale Club Holdings is displaying some positive trends. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 18%. The amount of capital employed has increased too, by 21%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

What We Can Learn From BJ's Wholesale Club Holdings' ROCE

All in all, it's terrific to see that BJ's Wholesale Club Holdings is reaping the rewards from prior investments and is growing its capital base. And a remarkable 265% total return over the last five years tells us that investors are expecting more good things to come in the future. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

If you want to continue researching BJ's Wholesale Club Holdings, you might be interested to know about the 2 warning signs that our analysis has discovered.

While BJ's Wholesale Club Holdings isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.

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