Returns On Capital Signal Tricky Times Ahead For Lindblad Expeditions Holdings (NASDAQ:LIND)

There are a few key trends to look for if we want to identify the next 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. In light of that, when we looked at Lindblad Expeditions Holdings (NASDAQ:LIND) and its ROCE trend, we weren't exactly thrilled.

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. The formula for this calculation on Lindblad Expeditions Holdings is:

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

0.017 = US$9.1m ÷ (US$852m - US$319m) (Based on the trailing twelve months to September 2023).

So, Lindblad Expeditions Holdings has an ROCE of 1.7%. In absolute terms, that's a low return and it also under-performs the Hospitality industry average of 9.4%.

See our latest analysis for Lindblad Expeditions Holdings

In the above chart we have measured Lindblad Expeditions Holdings' prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Lindblad Expeditions Holdings here for free.

What The Trend Of ROCE Can Tell Us

On the surface, the trend of ROCE at Lindblad Expeditions Holdings doesn't inspire confidence. Over the last five years, returns on capital have decreased to 1.7% from 8.2% five years ago. However, given capital employed and revenue have both increased it appears that the business is currently pursuing growth, at the consequence of short term returns. If these investments prove successful, this can bode very well for long term stock performance.

In Conclusion...

Even though returns on capital have fallen in the short term, we find it promising that revenue and capital employed have both increased for Lindblad Expeditions Holdings. And there could be an opportunity here if other metrics look good too, because the stock has declined 48% in the last five years. So we think it'd be worthwhile to look further into this stock given the trends look encouraging.

Lindblad Expeditions Holdings does have some risks though, and we've spotted 1 warning sign for Lindblad Expeditions Holdings that you might be interested in.

While Lindblad Expeditions 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.