Kewaunee Scientific (NASDAQ:KEQU) Shareholders Will Want The ROCE Trajectory To Continue

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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at Kewaunee Scientific (NASDAQ:KEQU) and its trend of ROCE, we really liked what we saw.

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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 Kewaunee Scientific is:

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

0.077 = US$11m ÷ (US$189m - US$50m) (Based on the trailing twelve months to January 2025).

Therefore, Kewaunee Scientific has an ROCE of 7.7%. In absolute terms, that's a low return and it also under-performs the Medical Equipment industry average of 10%.

Check out our latest analysis for Kewaunee Scientific

Historical performance is a great place to start when researching a stock so above you can see the gauge for Kewaunee Scientific's ROCE against it's prior returns. If you're interested in investigating Kewaunee Scientific's past further, check out this free graph covering Kewaunee Scientific's past earnings, revenue and cash flow.

So How Is Kewaunee Scientific's ROCE Trending?

Kewaunee Scientific has recently broken into profitability so their prior investments seem to be paying off. The company was generating losses five years ago, but now it's earning 7.7% which is a sight for sore eyes. Not only that, but the company is utilizing 136% more capital than before, but that's to be expected from a company trying to break into profitability. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

The Bottom Line

To the delight of most shareholders, Kewaunee Scientific has now broken into profitability. And a remarkable 255% 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 Kewaunee Scientific can keep these trends up, it could have a bright future ahead.

Kewaunee Scientific does come with some risks though, we found 3 warning signs in our investment analysis, and 1 of those is significant...

While Kewaunee Scientific 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.