Shareholders Would Enjoy A Repeat Of IRADIMED's (NASDAQ:IRMD) Recent Growth In Returns

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. With that in mind, the ROCE of IRADIMED (NASDAQ:IRMD) looks great, so lets see what the trend can tell us.

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

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. The formula for this calculation on IRADIMED is:

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

0.24 = US$23m ÷ (US$102m - US$8.5m) (Based on the trailing twelve months to March 2025).

So, IRADIMED has an ROCE of 24%. In absolute terms that's a great return and it's even better than the Medical Equipment industry average of 10%.

View our latest analysis for IRADIMED

In the above chart we have measured IRADIMED's 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 IRADIMED for free.

What Does the ROCE Trend For IRADIMED Tell Us?

We like the trends that we're seeing from IRADIMED. Over the last five years, returns on capital employed have risen substantially to 24%. 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 47%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

Our Take On IRADIMED's ROCE

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what IRADIMED has. Since the stock has returned a staggering 158% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if IRADIMED can keep these trends up, it could have a bright future ahead.

While IRADIMED looks impressive, no company is worth an infinite price. The intrinsic value infographic for IRMD helps visualize whether it is currently trading for a fair price.

IRADIMED 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. 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.