Stock Analysis

Returns on Capital Paint A Bright Future For Cross Country Healthcare (NASDAQ:CCRN)

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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. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. And in light of that, the trends we're seeing at Cross Country Healthcare's (NASDAQ:CCRN) look very promising so lets take a look.

Return On Capital Employed (ROCE): What Is It?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. To calculate this metric for Cross Country Healthcare, this is the formula:

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

0.42 = US$281m ÷ (US$948m - US$272m) (Based on the trailing twelve months to December 2022).

Thus, Cross Country Healthcare has an ROCE of 42%. That's a fantastic return and not only that, it outpaces the average of 9.4% earned by companies in a similar industry.

See our latest analysis for Cross Country Healthcare

NasdaqGS:CCRN Return on Capital Employed March 15th 2023

Above you can see how the current ROCE for Cross Country Healthcare 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 report on analyst forecasts for the company.

What Does the ROCE Trend For Cross Country Healthcare Tell Us?

The trends we've noticed at Cross Country Healthcare are quite reassuring. Over the last five years, returns on capital employed have risen substantially to 42%. The amount of capital employed has increased too, by 81%. So we're very much inspired by what we're seeing at Cross Country Healthcare thanks to its ability to profitably reinvest capital.

In Conclusion...

In summary, it's great to see that Cross Country Healthcare can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And a remarkable 107% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if Cross Country Healthcare can keep these trends up, it could have a bright future ahead.

Cross Country Healthcare does have some risks though, and we've spotted 1 warning sign for Cross Country Healthcare that you might be interested in.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets here.

What are the risks and opportunities for Cross Country Healthcare?

Cross Country Healthcare, Inc. provides talent management and other consultative services for healthcare clients in the United States.

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  • Trading at 63.7% below our estimate of its fair value

  • Earnings grew by 42.8% over the past year


  • Earnings are forecast to decline by an average of 16.8% per year for the next 3 years

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