Returns On Capital At Integra LifeSciences Holdings (NASDAQ:IART) Have Hit The Brakes

If you're looking for a multi-bagger, there's a few things to 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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Although, when we looked at Integra LifeSciences Holdings (NASDAQ:IART), it didn't seem to tick all of these boxes.

Understanding 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 Integra LifeSciences Holdings:

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

0.078 = US$271m ÷ (US$3.7b - US$282m) (Based on the trailing twelve months to March 2023).

Thus, Integra LifeSciences Holdings has an ROCE of 7.8%. On its own, that's a low figure but it's around the 8.9% average generated by the Medical Equipment industry.

View our latest analysis for Integra LifeSciences Holdings

Above you can see how the current ROCE for Integra LifeSciences Holdings compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Integra LifeSciences Holdings here for free.

SWOT Analysis for Integra LifeSciences Holdings

What Does the ROCE Trend For Integra LifeSciences Holdings Tell Us?

Things have been pretty stable at Integra LifeSciences Holdings, with its capital employed and returns on that capital staying somewhat the same for the last five years. This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. So don't be surprised if Integra LifeSciences Holdings doesn't end up being a multi-bagger in a few years time.

The Key Takeaway

In a nutshell, Integra LifeSciences Holdings has been trudging along with the same returns from the same amount of capital over the last five years. And investors appear hesitant that the trends will pick up because the stock has fallen 36% in the last five years. On the whole, we aren't too inspired by the underlying trends and we think there may be better chances of finding a multi-bagger elsewhere.

Like most companies, Integra LifeSciences Holdings does come with some risks, and we've found 1 warning sign that you should be aware of.

While Integra LifeSciences 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.