Investors Will Want Bloomin' Brands' (NASDAQ:BLMN) Growth In ROCE To Persist

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Speaking of which, we noticed some great changes in Bloomin' Brands' (NASDAQ:BLMN) returns on capital, so let's have a look.

What Is 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. Analysts use this formula to calculate it for Bloomin' Brands:

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

0.15 = US$363m ÷ (US$3.4b - US$920m) (Based on the trailing twelve months to September 2023).

Thus, Bloomin' Brands has an ROCE of 15%. On its own, that's a standard return, however it's much better than the 9.1% generated by the Hospitality industry.

View 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 report for Bloomin' Brands.

What The Trend Of ROCE Can Tell Us

Investors would be pleased with what's happening at Bloomin' Brands. Over the last five years, returns on capital employed have risen substantially to 15%. 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 40%. So we're very much inspired by what we're seeing at Bloomin' Brands thanks to its ability to profitably reinvest capital.

The Bottom Line

All in all, it's terrific to see that Bloomin' Brands is reaping the rewards from prior investments and is growing its capital base. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 68% return over the last five years. 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.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 3 warning signs for Bloomin' Brands (of which 1 is a bit concerning!) that you should know about.

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.