Lantheus Holdings (NASDAQ:LNTH) Is Investing Its Capital With Increasing Efficiency

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. With that in mind, the ROCE of Lantheus Holdings (NASDAQ:LNTH) looks great, so lets see what the trend can tell us.

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

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. Analysts use this formula to calculate it for Lantheus Holdings:

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

0.30 = US$484m ÷ (US$1.8b - US$237m) (Based on the trailing twelve months to March 2024).

Thus, Lantheus Holdings has an ROCE of 30%. That's a fantastic return and not only that, it outpaces the average of 10% earned by companies in a similar industry.

Check out our latest analysis for Lantheus Holdings

In the above chart we have measured Lantheus Holdings' 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 Lantheus Holdings for free.

What Does the ROCE Trend For Lantheus Holdings Tell Us?

Investors would be pleased with what's happening at Lantheus Holdings. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 30%. 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 297%. So we're very much inspired by what we're seeing at Lantheus Holdings thanks to its ability to profitably reinvest capital.

Our Take On Lantheus Holdings' ROCE

In summary, it's great to see that Lantheus Holdings 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. Since the stock has returned a staggering 345% 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 Lantheus Holdings can keep these trends up, it could have a bright future ahead.

If you'd like to know more about Lantheus Holdings, we've spotted 2 warning signs, and 1 of them makes us a bit uncomfortable.

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.

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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.

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