Many Would Be Jealous Of National Beverage's (NASDAQ:FIZZ) Returns On Capital

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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. With that in mind, the ROCE of National Beverage (NASDAQ:FIZZ) looks attractive right now, so lets see what the trend of returns can tell us.

What is 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. To calculate this metric for National Beverage, this is the formula:

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

0.34 = US$208m ÷ (US$751m - US$140m) (Based on the trailing twelve months to October 2020).

Therefore, National Beverage has an ROCE of 34%. In absolute terms that's a great return and it's even better than the Beverage industry average of 13%.

View our latest analysis for National Beverage

Above you can see how the current ROCE for National Beverage 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 report for National Beverage.

What Can We Tell From National Beverage's ROCE Trend?

It's hard not to be impressed by National Beverage's returns on capital. The company has consistently earned 34% for the last five years, and the capital employed within the business has risen 201% in that time. Returns like this are the envy of most businesses and given it has repeatedly reinvested at these rates, that's even better. You'll see this when looking at well operated businesses or favorable business models.

In Conclusion...

In short, we'd argue National Beverage has the makings of a multi-bagger since its been able to compound its capital at very profitable rates of return. And long term investors would be thrilled with the 127% return they've received over the last five years. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

While National Beverage looks impressive, no company is worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether FIZZ is currently trading for a fair price.

National Beverage 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. 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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