What trends should we look for it we want to identify stocks that can multiply in value over the long term? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, Bloomin' Brands (NASDAQ:BLMN) looks quite promising in regards to its trends of return on capital.
Understanding 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. Analysts use this formula to calculate it for Bloomin' Brands:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.068 = US$171m ÷ (US$3.3b - US$777m) (Based on the trailing twelve months to June 2025).
Therefore, Bloomin' Brands has an ROCE of 6.8%. Ultimately, that's a low return and it under-performs the Hospitality industry average of 10%.
See our latest analysis for Bloomin' Brands
In the above chart we have measured Bloomin' Brands' 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 analyst report for Bloomin' Brands .
What Does the ROCE Trend For Bloomin' Brands Tell Us?
Bloomin' Brands' ROCE growth is quite impressive. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 293% in that same time. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. It's worth looking deeper into this though because while it's great that the business is more efficient, it might also mean that going forward the areas to invest internally for the organic growth are lacking.
The Bottom Line
To sum it up, Bloomin' Brands is collecting higher returns from the same amount of capital, and that's impressive. And since the stock has fallen 42% over the last five years, there might be an opportunity here. With that in mind, we believe the promising trends warrant this stock for further investigation.
One more thing, we've spotted 4 warning signs facing Bloomin' Brands that you might find interesting.
While Bloomin' 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.
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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.